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Canada franchising

Question: Hi, I am trying to become a Master Franchisee of a Scottish company and take it to Canada. Could you please give me advice on the fundamental steps and essential requirements needed in order to achieve this?

Answer: Thanks for your enquiry. You’re in a slightly unusual position in that you’re based in Scotland and taking a master franchise from a company here, but planning to take Canada as your territory and move there to run the new business.

The first thing to bear in mind is that franchising in Scotland (or UK) is regulated differently than in Canada. In Canada, there is specific franchising regulation, including a need to give prospective franchisees full formal disclosure information before you sell them a franchise. It’s unlikely your franchisor will have gone through that process for you, so you will need to factor in the cost and time of doing this yourself, and build that into your business plan. Advice from good local franchising lawyers will be essential here.

Aside from that, you should be thinking of the following points:

    1. What protection does the franchisor have for the brand and business system in Canada? Trade marks are territorial, so if they have a registered trade mark in the UK, that won’t give protection in Canada.

    2. Has the franchisor appointed a master franchisee before? It’s different from appointing an “ordinary” franchisee, so you should ensure they are able (and legally committed) to training and supporting you not just in the core franchise business system but also in how to recruit and support franchisees, as that will be your business once you’re up and running.

    3. Does the business need much in the way of “translation” to work in Canada? I don’t mean just translation of language (although in Canada that may be relevant to include French-speaking Quebec) but also the actual business itself. Taking a business to a new country means it needs to reflect local markets and culture, and the way it is marketed does too. Although there are many successful international franchises, some businesses just don’t travel that well.

    4. How will support be handled? You’ll be a long way from the centre of expertise, and subject to a time difference.

    5. As you’ll be starting up a business in Canada, you should also consider taking advice from local lawyers and accountants on the best business vehicle to set up (partnership, sole trader, corporation) and take good local tax advice as the tax regime in Canada is different from here in the UK. If you’re relocating from the UK to Canada to run this business you should put your financial and tax affairs here in order before you go.

There are also a number of other considerations that should apply to the purchase of any master franchise, including the nature of the business, the targets you’ll be expected to meet, the nature of the supply chain for the business and so on. They’re outside the scope of this reply but you should get good advice on all of these as part of this process.

Angus G. MacLeod, Wright, Johnston & Mackenzie LLP
agm@wjm.co.uk
www.wjm.co.uk

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