BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

July 10, 2012 09:00 ET

What's In a Name: BMO Study Reveals 'Brand Power' Attracts Franchise Owners

- Franchised businesses account for more than 40 per cent of all retail sales

- More than 78,000 franchises across Canada employ over 1.5 million people

- BMO offers advice for Canadians considering buying a franchise

TORONTO, ONTARIO--(Marketwire - July 10, 2012) - BMO Bank of Montreal released a study of Canadian franchisees that indicates brand recognition and access to a large support network provide the greatest advantages to owning a franchise.

The survey, conducted by Leger Marketing, also asked franchise owners why they selected franchising over starting their own business*:

  • Appeal of training and central support - 29 per cent;
  • Proven business model - 24 per cent;
  • Predictable start-up costs -14 per cent; and
  • Lack of experience in owning a business - 14 per cent.

"Franchising is enjoying continued growth in North America," said Joseph Pisani, National Manager, Franchising, BMO Bank of Montreal. "For Canadians who are seeking to start their own business, a franchise may be the best route to increase their chances for success. As part of a major franchise network, an owner can expect to benefit from professional marketing, national advertising, specialized training and centralized purchasing."

"Supported by healthy job growth and low interest rates, April 2012 sales at Canadian retailers - excluding automotive dealers and gasoline stations - picked up to a 2.2 per cent year-over-year rate, from 1.5 per cent in 2011," said Sal Guatieri, Senior Economist, BMO Capital Markets. "However, sales are expected to remain moderate in the year ahead, as consumers rein in elevated debts and take advantage of the strong Canadian dollar to shop abroad."

According to Mr. Pisani, all potential franchise owners should do their homework before investing. "BMO can assist with the investigation process by helping clients ask the right questions of the franchisor," added Pisani.

If you are thinking about franchise ownership, BMO highlights ten key issues of franchising that you should investigate first.

1. Who's buying what you are selling?

  • Is there strong consumer demand, and is the demand expected to continue?
  • Who are your competitors, and could more enter the market in the next few years?
  • Is the product or service of outstanding quality, and how does its quality compare to the competition?

2. Do your research

  • What's the story on the franchisor's business record and reputation?
  • Have you contacted government consumer protection agencies, Canadian Franchise Association and your local Better Business Bureau?
  • Is the franchisor's infrastructure comprehensive and stable?

3. Read the fine print

  • Have you reviewed the franchise agreement with an independent lawyer who specializes in franchise law?
  • Are the terms of the agreement in line with your expectations?
  • Does it cover the challenges you will face in running an independent business?

4. Do they have staying power?

  • Is the franchisor financially strong and stable?
  • What is the background and experience of senior management?
  • Does the franchisor make available a "Disclosure" document?

5. What does it cost and what do you get for it?

  • How is the franchisor compensated?
  • What does the franchise fee cover?
  • What do you receive in exchange for on-going royalty payments?

6. What's in it for them?

  • Does the franchisor own the land or building?
  • Is the franchisor prepared to go on the lease?
  • Will the franchisor provide you with financial assistance?

7. Is there room to grow?

  • What is the franchisor's plan for expansion and target markets for growth?
  • Will your franchise be located where the traffic and demand are likely to be?
  • Are you assured of exclusive rights to the franchisor's product and service?

8. Will you have the research, tools, and support you need?

  • Does the franchisor thoroughly research new markets using reliable and credible market research methods?
  • Will you, as a potential franchisee, have access to marketing and product information regarding your industry as well as your specific business?
  • Will the franchisor assist you in the development of your business plan?

9. Do you fit the profile?

  • What kind of people is the franchisor looking for as potential franchisees?
  • Is there a typical franchisee profile?
  • Is there any special training, educational or other requirements the franchisor would ask of you?

10. Get the big financial picture

  • What is the total cost, including staffing, equipment, inventory, leasehold improvements, taxes, advertising and promotion?
  • What is the minimum cash commitment you must make?
  • Has the franchisor established a pre-arranged financial services program for franchisees with a financial institution?

The survey conducted by Leger Marketing was completed between March 21, 2012 and April 12, 2012 with a sample of 500 Canadian business owners. A probability sample of the same size would yield a margin of error of ±4.38%, 19 times out of 20.

*asterisk denotes small sample size

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $526 billion as at April 30, 2012, and more than 47,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.

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