Having been both a legal practitioner, a franchisor and a master franchisee in Quebec, I have gained a unique perspective on franchising in the province.
At a convention a few years back, I was explaining to a successful franchisor how the Quebec market was ripe for her service and asked why she did not expand into the province. She replied, “Quebec? That’s like going to Mars!” Her words stunned me. I believe Quebec is a ‘distinct’ society, but Martians? True, several franchises have come to Quebec and failed, but many do prosper and have been rewarded with higher ticket averages and consumer loyalty. Although the entry price may not be cheap, the size of the market is something to consider, one third of the population of Canada lives in Quebec so it is not a market to ignore—just do your homework first.
Making the move
To capitalize on the Quebec market, you must first be willing to make the investment, both in dollars and manpower. One obvious obstacle is the French language, which seems to strike fear in many hearts and pocketbooks of senior management. Since French is the official language of Quebec, it must be predominant, even in bilingual materials. Simply stated, language laws require all documents, including the franchise agreement, operations manual, marketing materials and other papers used in the course of business, be translated into French. This is a one-time start-up cost of doing business. While it is expensive, the investment is generally recuperated from initial franchise fees over time.
When to translate?
Some wait until they sell a franchise to proceed, but it may be a good idea to translate material before selling. This shows prospective franchisees you have already made the investment and are committed to doing business in Quebec.
Language laws mostly significantly affect marketing and product packaging—while English is not prohibited, French descriptions, directions and ingredients must be predominant. In this global economy, it is becoming more and more common for suppliers to take care of this for you. However, if it has not been taken care, simple solutions such as stickers or package inserts also do the trick. The task is not as difficult as it sounds, but it does require planning and organization.
As for signage, it is best to come up with a French version of your Trade Name as this really shows a commitment to the Province. All trademarked names and logos can be used even in English, but the French must be predominant.
Failing to work with local professionals is the number one reason franchisors fail when they come to Quebec. Many franchises expand into the province with a tremendously successful marketing strategy from other provinces/states, only to find results are not as successful as anticipated. One way to have local representation is to set up a small regional office with a franchising director or regional manager. This establishes a presence in the market, which can be used for meetings and corporate visits. It is also cost-efficient and provides a sense of professionalism and permanence, reassuring to prospective franchisees. The representative should be a mid-level manager with franchising experience. Alternatively, there are franchise consultants who work based on a project fee or retainer basis and brokers who work on commission.
Entering the market
Quebec has a vibrant franchise industry with more than 100 homegrown franchise systems, with many managing some 100 units. There are several methods for entering into Quebec:
- Master franchise agreement. Essentially, a franchisee becomes you in Quebec, selling and providing all services to franchisees, which you normally offer to other provinces/states.
- Area development. One or many agreements are made and an individual or corporation who is granted several years in which to establish a predetermined number of units in a defined territory. This agreement, with a solid candidate who has both general business experience and the financial capacity, is an excellent method to adopt;
- Joint ventures. This approach, where the franchisor and Quebec franchisee are partners in a venture for Quebec development, is becoming more popular; and
- Traditional development of selling individual units. Before you sell any franchises, it may be a good idea to operate a corporate store for at least six months to a year. To many, this step is optional. I believe if you are going to do business in Quebec, you should fully understand the market to gauge qualities of an ideal franchisee.
Remember, what makes a good franchisee in another area may not be suitable in Quebec. As information from surveys and graphs can be limited, without local representation, and preferably a corporate store, there is no way of truly assessing the likelihood of your franchisees’ success.
When entering a new legal jurisdiction, make sure to review and fully understand the legislation governing the industry and the rules or regulations affecting your operations. In Quebec, there is no franchise legislation per se, so you do not have to provide a disclosure document. However, most franchisors do provide it as a goodwill gesture and because it answers most questions franchisees have. If you decide to offer it, translating it beforehand is a sign of goodwill and will save time and money in the end.
A vital piece of advice here: if you do provide a disclosure document, do not sign it. Otherwise, you will be bound by it—and why create a legal obligation that can come back to haunt you? In Quebec, you are merely providing it for information purposes only.
Unlike other provinces, all legal matters dealing with business and personal relations, including franchise legislation and rules of conduct, are set out in the Civil Code of Quebec. Provinces without a code have legislation in specific areas and govern via case law (i.e. how the courts have decided similar cases in the past). In Quebec, the Code sets all guiding principles and remedies and how case law interprets it. The Code’s governing principle states: all relationships must be conducted in good faith and in the spirit of fair dealing, regardless of whether this provision is in the contract or not.
In industries such as pharmaceutical retailing, opticians, travel agencies and real estate brokers, Quebec has specific legislation.
Remember, when entering into any Canadian province, your business model or franchise documentation may have to be amended prior to entering the market.
The beauty of the Quebec market is that Quebecers are more loyal to brands and less price sensitive than in any other Province. So those brands that do make the effort will be handsomely rewarded.
Generally speaking, Quebecers welcome and are open to new concepts. Success will depend largely on ensuring franchisees have a local voice representing the needs of the market to an out-of-province head office. There is certainly enough expertise in Quebec to ensure franchisor entry is smooth and well-executed. Quebec is worth courting—after all, they do not call it La Belle Province for nothing!
Lori Karpman is president of Lori Karpman & Company A full-service firm providing a full range of consulting and legal services. (514) 481-2722 or via e-mail at [email protected] www.lorikarpman.com