Master franchisor model speeds up Canadian rollout for Two Men and a Truck

It’s always a balancing act whether you go with a master franchisor model or not, said John Sotos, founding partner of Sotos LLP, Toronto-based lawyers and trademark agents. “Do you want rapid expansion; or do you want to go slow and run the risk of competitors overtaking you?”

The Financial Post
August 26, 2013

Master franchisor model speeds up Canadian rollout for Two Men and a Truck
Denise Deveau

Two%20Men%20and%20a%20Truck.jpg

John Prittie, master franchisor for Two Men and a Truck, poses in front of a company vehicle in Toronto. Darren Calabrese/National Post

John Prittie is pretty much finished with his Ontario expansion plans: “We only have one more franchise to put in Ontario and that’s Windsor,” said the president and master franchisor for Two Men and a Truck Canada.

The opportunity to take on a master franchisor role with a company anxious to move into Canada was too tempting to turn down, he said. “The whole idea appealed to me when I saw a chance to buy into a system with a very successful business model, as well as proven systems, policies and procedures.”

When he signed the deal in 2005, Two Men and a Truck had just north of US$200-million in sales and 175 franchises up and running in the United States. Before committing, however, he took a good hard look at the moving industry in Canada.

“The industry here is not regulated and very polarized, and it didn’t necessarily have a good reputation. We had a chance to join one of the largest systems in North America to clean up an industry [in a market where] 15% to 16% of the population moves on an annual basis.”

The Canadian franchise operations have been growing steadily since, starting with a single office in Hamilton and expanding to 21 locations in Ontario. The next step is western and then eastern Canada. Mr. Prittie’s goal is to have 45 locations covering all the major metropolitan areas.

Gary Prenevost, president of FranNet of Southern Ontario in Mississauga, a franchise matchmaking service, said master franchising is a common way for U.S. companies to come up to Canada. “The main reason is speed of growth and speed to market.”

With the economy on the upswing, he said, this has been one of the hottest years for master franchising deals. “We’re 73% ahead of last year in the first six months. The market is the hottest we’ve seen in over 20 years. A lot of executives are looking to master franchise deals for long-term wealth creation.”

It’s always a balancing act whether you go with a master franchisor model or not, said John Sotos, founding partner of Sotos LLP, Toronto-based lawyers and trademark agents. “Do you want rapid expansion; or do you want to go slow and run the risk of competitors overtaking you?”

Local expertise, capital and contacts are especially valuable when expanding into markets where there are language, distance or cultural barriers, he added. “In some markets, a lot of real estate is controlled by families or groups. If you want to be a player you have to partner with someone. For it to work, you have to have a good master franchisor who possesses attributes in that market you don’t.”

For a master franchisor, it’s a big commitment both in terms of time and money, given that licences typically start in the $250,000 range, Mr. Prenevost said. “It’s not for the faint of heart given the initial investment and operating cash flow requirements. These could go to $500,000 or more if it’s a bricks-and-mortar operation. It also takes four to five years to build up an annuity stream.”

Anyone looking for a master franchisor opportunity should do their due diligence, he said. “The holy grail of franchise research is looking at existing franchisees. Every system has weak performers and superstars. The question is, where is the majority of that curve? Make sure you know that before you invest.”

He also advises going through compliance training, which is offered by several franchise law firms. “You have to understand provincial laws when recruiting franchisees. Then you have to babysit the heck out of the first two or three and understand what it’s like to work with them.”

One thing most master franchisors should do is operate a couple of units themselves, Mr. Prittie said. “Having a couple of corporately owned locations run by a general manager allows you to learn and understand the business. They can also be used for training.”

All things considered, the franchise model is often the best way to get a toehold in new markets, said Andraya Frith, chairwoman for the national franchise and distribution group at Osler in Toronto. “The model is often a better way to go because it’s a less capital intensive way to enter a market more quickly.”

The key for franchises, not surprisingly, is to pick local partners with the right combination of experience, capital and resources, Ms. Frith said. “A lot of very successful franchisors can really flounder if the wrong partner can’t meet their minimum development obligations.”

Mr. Prittie credits the infrastructure that was in place in the U.S. for Two Men and a Truck being able to come out of the gate and win some awards of excellence. “It was simply a matter of us doing an excellent job of executing in Canada.”

Comments

1. Carl Zwisler
When negotiating master franchise rights from a franchisor which is using that format for the first time, determine what policies and procedures the franchisor has in place to support the master franchisee in its role as a "franchisor' in its territory. Also, thoroughly examine whether the ways in which fees collected from subfranchisees will be shared, to make sure both the master franchisee and the franchisor will be profitable enough (if the plan works) to warrant continuing investment in the relationship.

http://business.financialpost.com/2013/08/26/mastor-franchisor-model-speeds-up-canadian-rollout-for-two-men-and-a-truck/


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