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(Fernando Morales)
(Fernando Morales)

Start: Tony Wilson

It's a good time to bring U.S. franchises north Add to ...

I wrote the past two columns on international franchise expansion from cafés in Istanbul and Cairo. What better places to consider the worldwide expansion, through franchising and licensing, of well-known brands? The two cities are so unlike their counterparts in North America, you gain a new perspective on international business.

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Now that I’ve returned to Canada, I want to talk about a country that’s the envy of the business world. It’s where you’re going to increasingly see expansion by U.S. and European brands, whether through franchising or by direct expansion. It has a strong and stable currency, a healthy banking sector, an educated population, and an abundance of natural resources craved by the world, especially oil.

It’s not Norway. It’s not Switzerland. It’s Canada.

This month’s Esquire magazine features a column on Canada, with artwork from a $20 bill showing the Queen winking at readers. The piece is critical of the United States and flattering to Canada. In short, while the U.S. spent itself into near insolvency, Canada tamed its deficit and debt, thanks to a regulatory and lending environment that wouldn’t allow the sub-prime mortgage meltdown.

Canada came out of the latest financial crisis reasonably well, it argues. “When the worldwide system collapsed, boring Canada didn't have a single bank poisoned by toxic assets and not a penny of public money was used to bail out its financial institutions.”

It adds that Canada was expected to have a 3-per-cent growth rate this year due, in part, to prudent fiscal management, oil and natural gas reserves that rival those of the Middle East, and lots of other natural resources that the Chinese want to buy. Oh, and it happens to be really close to the United States, most of the population speaks English, and it’s generally safe and clean, which is a big plus compared with other countries.

“The combination of a robust commodities supply and the tech and banking strengths that are enhanced by stable business practices is formidable,” the article went on to say. “As the rest of the world's economies start to recover, so will the prices of the very commodities Canada sells, like oil. Meanwhile, where are countries going to get money to buy these commodities? From Canada's banking system, suddenly among the world's strongest.”

The same day I read that glowing piece, another article came across my desktop about Buffalo Wild Wings, of Columbus, Ohio, which is expanding to Canada. It’s a restaurant and sports-bar franchise that’s big on wings, beer and TV screens that show professional sports. Canada, with hockey on TV from September to June, seems a perfect fit.

But there was more to the announcement than that. “The Canadian economy is in a lot better shape than the U.S. economy and that likely makes it more attractive in terms of development,” analyst Destin Tompkins of Morgan, Keegan & Co. says in the press release. “There are several companies that are already there. I wouldn't be surprised if we see more that start to enter Canada similar to what Buffalo Wild Wings announced this week.”

If you’ll forgive the food service sector pun, here’s today’s take-away: you can expand your company and your brand to Egypt, Turkey or a host of other countries by way of franchising, just as I said a few weeks ago. But it seems the business environment in the United States is so bad, and the environment in Canada is so good right now, Canadians should be approaching U.S. franchisors to get them to expand above the 49th Parallel.

They could expand by Area Development Agreement, where a Canadian entity is granted the rights to develop a U.S. system for all or parts of Canada but the U.S. franchisor is always the party on the contract. Or, they might expand by way of master franchising, where the U.S.-based franchisor will grant all or parts of Canada to a Canadian master franchisee, who will have the rights to develop Canada and grant franchises in its own name. Or they could simply build corporate locations here and not franchise them.

Echoing what a U.S. lawyer told me at a franchise convention last May near Montreal, the U.S. market was oversold and oversaturated with franchises. U.S.-based franchisors had nowhere left to go in their home country. So he told me that affluent, stable, wealthy, educated and nearby Canada was a better expansion bet than anywhere south of the border.

So it wouldn’t hurt to investigate some U.S. brands and try to secure the rights to all or parts of Canada.

Special to the Globe and Mail

Vancouver franchise lawyer Tony Wilson is the author of Buying A Franchise In Canada – Understanding and Negotiating Your Franchise Agreement and he is ranked as a leading Canadian franchise lawyer by LEXPERT. He is head of the Franchise Law Group at Boughton Law Corp. in Vancouver and acts for both franchisors and franchisees across Canada, many of whom are in the food services and hospitality industry. He is a registered Trademark Agent, an Adjunct Professor at Simon Fraser University and he also writes for Bartalk and Canadian Lawyer magazines.

 

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