Introduction to Franchising

AuthorFrank Zaid
ProfessionSenior Partner Osler, Hoskin & Harcourt LLP
1) Economic Impact of Franchising
Franchising is big business in Canada. Unfortunately, there are no
reliable statistics to let us know just how big franchi sing is. From a
consumer’s perception, franchised businesses are v isible everywhere.
Ironically, however, consumers, like lawyers and government repre-
sentatives, do not realize how extensive the franchise model has pene-
trated Canadi an business.
From traditional quick ser vice restaurants and fast food outlets,
to motor vehicle repair centres, drug stores, home maintenance servi-
ces, hotels, educational facilit ies, children’s play centres, second-hand
goods stores, convenience stores, donut shops, hair salons, packag ing
stores, tax services, and f‌itness centres, to name just a few examples,
franchised businesses continue to expand in virtually every product
and service indust ry. The Canadian Franchise Association, headquar-
tered in Mississauga, Ontario, lists t hirty-eight different categories of
product and service franchised busine sses.1 The International Fran-
chise Association, headquartered in Washington, D.C., in its 2005 dir-
1 Online at (accessible at time of w riting).
fra nchise law2
ectory,2 lists eighty-nine different product and ser vice categories. On its
website there are one hundred franchi se category listings. 3 Moreover,
the lists continue to ex pand regularly with the introduction of new and
innovative franchised businesse s.
The INFO Franchise Annual Directory,4 the main source of in-
dependent information regarding franchising, includes 5233 franchise
listings: 3436 in the United St ates, 1276 in Canada, and 521 overseas.
As quoted from John Naisbitt, author of Megatrends 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 countr ies.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 manufact urer/retailer dist ribution franchise s ystem follow-
ing the U.S. Civil War. However, franchising as a growt h vehicle really
began in earne st in the 1950s in the United States, when some of today’s
largest franchi sors 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 Restaur ants, Pizza Hut, Piggly Wiggly, Econo
Lodge, and Quality Inn, to name but a few, started franchising in the
1950s. But as growt h continued unprincipled and unregul ated in the
late 1960s, a number of high-prof‌ile franchise systems failed. One of
the more famous failures was t he Minnie Pearl chicken outlets fr an-
chised business. Although close to 2000 franchises had been sold in
North America by the sum mer of 1969, less than 200 actually opened,
and none of those survived ver y long.
Since the late 1960s, franchi sing has built a cred ible and substan-
tive base as a method of di stributing goods a nd services. The most
2 International Franchise Association, Franchise Opportunities Guide,Spring/Sum-
mer 2005 (Washington: Intern ational Franchise A ssociation, 2005).
3 Online at (accessi ble at
time of writ ing).
4 Info 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.
7 Online at worldfranc> (accessible at t ime of writing).

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