Introduction to Franchising
Author | Frank Zaid |
Profession | Senior Partner Osler, Hoskin & Harcourt LLP |
Pages | 1-23 |
CHAPTER 1
INTRODUCTION TO
FR ANCHISING
A.THE BUSINESS OF FRANCHISING
1)Economic Impact of Franchising
Franchising is big business in Canada. Unfortunately, there are no
reliable statistics to let us know just how big franchising is. From a
consumer’s perception, franchised businesses are visible everywhere.
Ironically, however, consumers, like lawyers and government repre-
sentatives, do not realize how extensive the franchise model has pene-
trated Canadian business.
From traditional quick service restaurants and fast food outlets,
to motor vehicle repair centres, drug stores, home maintenance servi-
ces, hotels, educational facilities, children’s play centres, second-hand
goods stores, convenience stores, donut shops, hair salons, packaging
stores, tax services, and fitness centres, to name just a few examples,
franchised businesses continue to expand in virtually every product
and service industry. The Canadian Franchise Association, headquar-
tered in Mississauga, Ontario, lists thirty-eight different categories of
product and service franchised businesses.1 The International Fran-
chise Association, headquartered in Washington, D.C., in its 2005 dir-
1Online at (accessible at time of w riting).
1
fra nchise law2
ectory,2 lists eighty-nine different product and ser vice categories. On its
website there are one hundred franchise category listings.3 Moreover,
the lists continue to ex pand regularly with the introduction of new and
innovative franchised businesses.
The INFO Franchise Annual Directory,4 the main source of in-
dependent information regarding franchising, includes 5233 franchise
listings: 3436 in the United States, 1276 in Canada, and 521 overseas.
As quoted from John Naisbitt, author ofMegatrends and Megatrends
2000: “Franchising is the single most successful marketing concept
ever.”5 So extensive is the impact of franchising worldwide that fran-
chise trade associations exist in sixty-one countries.6 The World Fran-
chise Council, formed in 1994 for “the encouragement of international
understanding and co-operation in the protection and promotion of
franchising,” is comprised of franchise associations from thirty-seven
member countries, including Canada.7
Where did it all begin? It is generally accepted that franchising
began in North America when the Singer Sewing Machine Company
initiated a manufacturer/retailer distribution franchise system follow-
ing the U.S. Civil War. However, franchising as a growth vehicle really
began in earne st in the 1950s in the United States, when some of today’s
largest franchisors pioneered their business models. Famous franchis-
ors such as McDonald’s, Baskin-Robbins, Dunkin’ Donuts, Midas Muf-
fler, Kentucky Fried Chicken, Holiday Inn, H&R Block, Duraclean,
Carvel Ice Cream, A&W Restaurants, Pizza Hut, Piggly Wiggly, Econo
Lodge, and Quality Inn, to name but a few, started franchising in the
1950s. But as growth continued unprincipled and unregulated in the
late 1960s, a number of high-profile franchise systems failed. One of
the more famous failures was the Minnie Pearl chicken outlets fran-
chised business. Although close to 2000 franchises had been sold in
North America by the summer of 1969, less than 200 actually opened,
and none of those survived very long.
Since the late 1960s, franchising has built a credible and substan-
tive base as a method of distributing goods and services. The most
2International Franchise Association, Franchise Opportunities Guide,Spring/Sum-
mer 2005 (Washington: Intern ational Franchise A ssociation, 2005).
3Online at (accessi ble at
time of writ ing).
4Info Franchi se News, Inc., The 2005 Franchise Annual (St. Cath arine’s: Info
Press Inc., 2005).
5Ibid. at H-5.
6Ibid. at H-7 to H-9.
7Online at worldfranc hisecouncil.org> (accessible at t ime of writing).
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