Considering a Foreign Franchise Expanding Into Canada? What You Need to Know
More and more franchises from other countries, particularly the US, are coming to Canada. If a foreign franchise opportunity has caught your eye, here's what you should know before you sign any agreements.
It's all about the trademark
For a foreign brand to have a better chance of success in Canada, it needs to make sure its intellectual property is protected or capable of being protected. If your brand can't secure its trademark, which is part of its recognition value to a franchisee, it can cause a real problem for you down the road as an owner. There will be nothing stopping another business from using that mark or a similar one, which could taint the entire system.
Market differences matter
Foreign franchises need to have a handle on the targeted Canadian market and make modification and adjustments as needed to suit those spending habits, preferences and tastes. Major brands have made that mistake in the past and have alienated their potential customer base as a result.
The legal ends need to be tied
No franchise should attempt to expand into Canada before having a handle on Canada's legal system and laws. In addition to having to provide a financial disclosure document that meets requirements in most areas of the country, some provinces have distinct legal systems that require special attention. In Quebec, for example, there are specific matters, such as French language translation, to consider.
Tax talk must take place
Taxes across borders always add some complications into the mix. When a Canadian franchisee pays a franchise fee to a US brand, for example, that money is usually subject to a 10 percent withholding tax. Details like these - specifically, who is paying this tax - need to be addressed in the negotiations between the franchisor and the franchisee.
Considering a new brand that is expanding into Canada from another country is always exciting. It's a fresh and new place in the country for people to go or try yet it still has some level of recognition among the Canadian public and is actively growing. Keep in mind, however, that international expansion is never as simple as opening a new location across the border. The brand you are interested in must consider all the angles and cover all its bases if it wants to be successful here.