Franchising thrives, but big growth over

Canada, with Ontario leading the way, is the most franchised economy in the world, says Metcalfe.

The Toronto Star
September 3, 1998

Franchising thrives, but big growth over
John Deverell

GordMetcalfFranconConsulting.jpg

FRANCHISING FOCUS: Gordon Metcalfe, president of Francon Consulting Ltd., tracks the franchising sector to assist companies in research and strategic planning.

HOW BIG A GAME IS BUSINESS FRANCHISING IN CANADA, AND WHERE IS IT HEADED?

We asked Gordon Metcalfe of Francon Consulting Ltd.
(First of two parts).

Canada, with Ontario leading the way, is the most franchised economy in the world, says Metcalfe.

The spectacular and homogenizing growth of franchised business systems continues, he observes, with 160 new franchisors entering the field last year – a 14 per cent increase.

Nationwide, he reports, there were 1,295 franchise systems operating at the end of last year with 76,000 franchised outlets, an estimated 1 million employees and $100 billion in sales.

Metcalfe runs a detailed database on franchised business from his office in Etobicoke and uses it to advise banks on lending strategy, companies on marketing and real estate strategy, and individuals thinking about buying business franchises.

Most of the new franchisors are small, however, and the annual growth in franchised outlets has slowed to a modest 2 per cent.

The fact is, says Metcalfe, the big expansion of franchising is behind us. Vacant commercial real estate isn’t as easily available as in the speculative 1980s or the depressed early 1990s and the pressure to buy or build your own job isn’t as acute as in the era of rampant corporate and government downsizing.

Some parts of the economy such as fast food, dominated by McDonald’s, Tricon (KFC, Pizza Hut), Tim Horton’s, A&W Canada and Cara (Harvey’s, Swiss Chalet, Second Cup) are approaching the point of franchise saturation. Others, including education and non-food services, have more room for profitable expansion.

Today, there are more than 1,350 franchisors peddling their concepts, nearly 60 per cent of them headquartered in Ontario. Most chains are small and the average franchisor coordinates 60 outlets, the number boosted by big fish like Tim Horton’s and Wendy’s, which control more than 1,500 outlets.

Metcalfe’s box score doesn’t take account of the distribution systems of the petroleum and car giants, or the food and hardware buying co-operatives, which would push the franchise figures much higher.

Canada has more franchisor chains per capita than the United States, as would be expected. But this country has a much higher density of franchisees at ground level – 2.5 per 1,000 of population, compared with 1.8 per 1,000 in the U.S.

That means we’re getting relatively more of the advantages of franchising – predictable standards of service, quality and price – and more of the downside, which is that everywhere feels like everywhere else.


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