What to Know About a U.S. Franchise in Canada

While Canada certainly has many successful franchise systems that were founded and grew at home, many brands born in the U.S. are quite familiar to Canadians. Therefore, you may be thinking about opening a franchise location in Canada from a U.S. brand you're interested in. 

As with any franchise investment, always do your research and make sure everything is reviewed before you sign any agreement. In addition to your typical due diligence, be mindful of some special concerns that can crop up in a cross-border franchising situation.

Eye the franchise agreement

Make sure your franchise agreement has been adapted for use in Canada. As noted by Tony Wilson for the Globe and Mail, sometimes franchisors fail to modify their agreements to conform to Canadian laws, and this can cost you. You'll also need to check if the language used for provisions is clear when viewed through the Canadian legal lens. Ambiguity in business contract language can lead to prolonged and costly legal disputes later, so check with a Canadian franchise attorney if you have any concerns.

Confirm trademark registration

Intellectual property, such as a trademark, is usually protected on a country-by-country basis. This means U.S. trademark references might not be immediately recognized in Canada. Trademarks and other brand property are part of the value of a franchise system, so you need to make sure your franchise agreement addresses the state and protection of the brand's intellectual property in Canada.

Review product sourcing

Your franchise agreement may regulate how you can obtain your supplies for your business. If your franchisor doesn't have suppliers of its product in place in Canada, it could mean shipping fees, duties and other costs you didn't anticipate because you'll have to import those items.

Look at the ad fund 

Part of your agreement may have a provision for a branding or advertising fund, and you are expected to contribute to this. The money in the fund goes toward broad campaigns, and it's often run on a national scale to benefit all the contributing franchisees. However, if the fund is meant for U.S. campaigns, it won't do anything for your Canadian location. Look at the agreement for references to a separate fund for Canada or an international fund that has the ability to reach the Canadian audience.

When you're in Canada and looking at a U.S. franchise, you also need to consider tax arrangements, training and how well the franchisor is prepared to comply with Canadian privacy and contest laws. Don't sign on the dotted line until you're certain that all potential problem areas have been thoroughly addressed by the franchisor.