While the proven systems of franchising remove much of the uncertainty associated with traditional business start-ups, a new venture still requires a certain level of courage, a willingness to take on financial risk and build something new.
You might say that if there’s one group that’s already “been there, done that”, it’s newcomers to Canada, who have taken an even bigger leap of faith to leave their home countries. The numbers confirm an entrepreneurial streak: in 2016, Statistics Canada published a study finding that 5.3 per cent of immigrant tax filers who came to Canada in 2000 owned private companies by 2010, in comparison to the 4.8 per cent of non-immigrants who owned a business the same year.
For this feature, we consulted with experts for tips on how newcomers to Canada can give themselves the best chance of success as franchisees; from conducting in-depth research on both sector and culture, to leveraging community contacts, to establishing a financial track record.
Start research early
Like anyone considering becoming a franchisee, newcomers need to start by doing their research and talking to those with franchising experience, says Cliff Richler, president of Network Franchising International and a consultant with over 35 years of experience. He adds that while the top three franchise sectors for newcomers are food, automotive, and retail, immigrants should primarily be looking at businesses in familiar sectors. “It’s very specific to an individual, based on their education, their background and their experience,” he says.
To get a general sense of the franchise landscape, Richler recommends checking out the resources of the Canadian Franchise Association and attending franchise trade shows. His consultancy also guides immigrants through the process, and he’s enthusiastic about the advantages of franchising for a newcomer. “There’s definitely a benefit. They’re buying into a brand and a name and a system, sources of supply, the best way to do it,” says Richler.
After settling on a sector, newcomers should get specific. “They should research each company in that sector. They should know the advantage or unique offering that the one he or she chooses has compared to the others,” he says, adding that the research should take three to six months. “They shouldn’t be in any rush to get going in their business until they’ve done their homework.”
Gaining first-hand experience by landing a job in the sector first can also help. “That would probably be the safest way: before they invest and risk any money, get to know the industry as an employee,” he says.
Seek out mentors to help learn the culture
Since immigrants will often have connections in the country already, Richler encourages them to seek advice from those contacts to help them understand the nuances of Canadian life. Utilize these contacts to gain insight into everything from day-to-day living to the value of the Canadian dollar and buying power compared to their country of origin. If they don’t have contacts, newcomers should try to establish relationships within their ethnic community. “They need to have someone they’re familiar with, to help them understand the Canadian culture and the local culture, and how that business would integrate into their area,” he says.
Yet another unique issue immigrants face is their language proficiency. Richler says newcomers need to be honest with themselves about their communication skills in English, and their home language, as that may influence their business choice.
Lay financial groundwork too
At the same time as they are researching franchises and developing networks, newcomers should also be establishing themselves financially.
“For any newcomer, it’s crucial to establish a Canadian credit history as soon as possible. If you’re new to Canada, one of the best ways to build a Canadian credit history is to open a Canadian credit card and start using it wisely,” Paul daSilva, director of National Franchise Markets for RBC. RBC, like many banks, offers credit options specifically for newcomers with no prior credit history required.
Newcomers should also start developing a business relationship with the lender. “Open the dialogue early,” says daSilva. “Interview the account manager. Do you feel comfortable with their experience and knowledge? Do you feel they have your best interest at heart? Can he or she suggest trusted advisors such as a franchise lawyer or franchise accountant they have worked with?” he counsels.
daSilva also recommends investigating other financial programs aimed at newcomers, specifically the Canada Small Business Financing Program designed to make it easier for small businesses including franchisees to get loans.
Get specific on your due diligence
Once a newcomer has a sector and a franchise in mind, continue with due diligence. “Location or territory is going to be very important. Understanding the demographics and the age groups, the income groups and the languages spoken, various factors come into play. If you’re new to the country, a lot of this is going to be strange to you,” says Richler.
daSilva says that insights can also come from interviewing existing franchisees. “These franchisees have already taken the journey many newcomers will be facing. Many of them had the same anxieties. Learn from their past experiences.”
Once they are ready to sign up, newcomers should also seek out independent legal advice from a lawyer familiar with franchising. “It should be a lawyer from their community who speaks their language, who’s been here for years and can guide them through the documents and the legalities required for them to sign a franchise agreement,” says Richler. The lawyer and other advisors can also help the newcomer to understand franchise regulations in Canada, which differ from those in the U.S. and in other countries, some of which are unregulated.
Go to the bank prepared
By the time they are ready to seek financing, ideally the newcomer has established a relationship with their banker, who will outline the documents required to consider a loan. “When the newcomer is ready to make a request for financing, they should have a well written and thorough business plan,” says daSilva, adding that most banks and franchisors will have templates, although they can’t complete the due diligence for the prospective franchisee.
Franchisees should also have an idea of what financing they need. Richler adds that newcomers need to think about all aspects of the franchise, from fees to fixtures and equipment, and also about what they can afford. “It’s similar to buying a house. What is their range, what investment can they comfortably afford? Plus, they need a reserve of living expenses and working capital,” he says.
In evaluating a potential franchisee, daSilva says he looks both at numbers and the person. “The element I look for is passion for the brand. I don’t mean that if you like to cook, you open a quick serve restaurant. If you love to create, you love working with people, you’re engaged with your customers and your staff, that’s a burning desire to see your business become viable,” he advises.
In the end, the right match will come down to good relationships on all sides, says daSilva. “Franchising is very much like marriage. You need to be passionate, need the ability to compromise with the needs of the franchisor. At times you’ll need to support or be supported, and you need to love being part of a franchise family.”
By Suzanne Bowness