RSCH 600: Research Methodologies & Inquiry University Canada West

 

The main purpose of this literature review is to analyze the food franchising market in Canada with the help of leading food franchise brands. This literature review investigates studies done on Canadian local business people who invest in food franchise and further it will put light on the future scope of investment into the food franchise. The review also aims at how food franchise is helping the Canadian economy to grow. Moreover, this literature will also discuss how to procure food franchise license and what are the financing options available.

RSCH 600: Research Methodologies & Inquiry, University Canada West

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Part 2- Literature Review

            Canada stands second after the United States in the world having a massive food industry with an estimate of 78,000 franchise units and 1,300 franchise brands (Watts, 2016). Food franchising has the largest market share among all the franchise industry in Canada. According to IBIS World report MacDonald, Tim Hortons, Subway and A&W food service of Canada with the market share of 14.7%, 7%, 7.5% and 5.7% respectively are the major players behind the popularity of food franchising business in Canada (Couillard,2019). Over the past few years, the franchising business in the food industry of Canada is showing tremendous growth. The upward trend in the food industry has opened the number of food franchising opportunities for investment. According to Franchise Canada report (2018), the number of Canadian youngsters and female between the ages of 18 to 35 are showing more interest in investing in food franchise business over the last five years. Although the above research articles provide the market analysis of food franchising in Canada it does not provide an in-depth analysis of food franchising. The above research articles can be improved by comparing the market trend of food franchising before and now.

            According to IBIS World report, the Fast-food Service Restaurants (FSRs)  in Canada have shown up the growth of 1.4% in the past five years. Moreover, the fast-food fragment of Quick Service Restaurant (QSRs) also went up by 2.8% during the same period. This tremendous growth has fruitfully affected the Canadian economy. Levitt (2012), also states that over the past few years food franchising business in Canada has positively reflected on the unemployment rate by creating more and more job opportunities. Food franchising business also leads to the trend of part-time and seasonal employees in Canada, especially for the Canadians youngsters and immigrants. Furthermore, food franchising business is expanding and also contributing to the Canadian Gross Domestic Product (GDP) by increased proportion every year (Couillard,2019). On the other side, the business’s contribution to Canadian imports and export is slow and steady (Levitt, 2012).  The IBIS World report confirms that the Food franchising business in Canada is at its mature phase of the business cycle and the contribution of the industry will be beneficial to the overall Canadian economy (Couillard,2019). The growth rate of the food franchise industry is expected to increase by 3% annually until 2024. In contrast, the growth rate of Canadian GDP is expected at the rate of 1.7% annually within the same duration (Levitt, 2012). While the difference between these two growth rates stipulates that the food franchise industry experienced strong growth in the past few years. The above research report by Couillard only talks about the past and the current trend of food franchise in Canada. Further, this article can be improved by showing the trend and scope of the food franchise industry in Canada. Similarly, Levit’s research study can become more efficient and reliable if the author mentions the past and present scenario of the food franchise industry in Canada.

 Couillard (2019), in the IBIS World report, states that the licensing in the Canadian food franchise industry is compiled with a modest level of regulation. The regulation in the food franchising industry covers comprehensive topics, which include food safety and standards, franchising requirements and labour conditions. The regulations are mainly enforced and legislate at the provincial level. In contrast, According to the International Franchise Association (2019), franchise not only includes the components of products, trademark and service but it also looks after marketing plans and operation manuals. The article describes various elements of a food franchise license. At first, the process begins with the Franchise Disclosure Document (FDD), a disclosure document that provides personal information about the franchise and the franchisor. The key components in the food franchise agreements are first, the use of trademarks this will help the franchisee to reap the benefits of the franchise with the help of a well-known trademark. Secondly, the terms and conditions of the franchise agreement which includes the duration of license, purchase and renewal of the agreement. Thirdly, franchisee’s fee and other payment will consist of mandatory fees like initial fees and what franchisee will receive in return, also royalty payments and when it is due. Further, it describes the obligations and duties of the franchisor, where the franchise will be bounded by training programs, also franchisee should meet the requirements of participation in business and maintaining adequate records. The fifth component is a restriction on goods and services offered, which mainly consist of required quality standards, approved advertising and suppliers, hours of operation and pricing. Lastly, this component mainly occurs for closing down or renewal of the agreement, which includes rights and termination of agreement along with descriptions about the transfer and renewal of franchise agreement (IFA, 2019). Couillard (2019), report only provides the outer information about food franchising license. Whereas, the report by IFA (2018),  provides an in-depth analysis of various elements and key components of procuring a food franchise license.

 Setting up one’s Food franchising in Canada involves huge investment as there are lots of different types of fees involved. Therefore, sometimes franchisee can’t allocate the funds through self-financing.  As Guillory (2018), in his article describes whether or not to finance the franchise and options to consider the same. The author mentions that most of the franchisor act as a financial supporter to the people who want to buy their franchise. Franchisor act as a medium of an instrument in helping franchisees to get their fees waived off and facilitate franchisee for getting a loan from the bank. However, not all franchisor does that. The author suggests that before we opted for which franchise to buy, we should anticipate whether or not they will offer to fund and compare another medium of financing in the market. Guillory also suggests banks for financing as they are the most traditional form of option available that supports the people who want to start their own business. But, you should have full access to all the information related to franchise business such as franchise sales figures and business statistics. It is mandatory to have this as banks sanction the loans based on the level of self-confidence and information we have about the business. Further, the author also mentions family and friends as a source of financing. Although these sources are less risky, if it’s not maintained or handled properly it can create a big problem. Thus, it’s better to have an agreement while dealing with friends and family for business purposes. Lastly, if anyone is having doubt on their potential of getting a loan from banks can go for the Canadian Small Business Financing Program operated by the Canadian government, who provides loan to the franchisees by sharing the risk with lenders. Similarly Watts (2018), also describes all of the above-mentioned options for financial support. Moreover, he also mentions the Angel Investors they are private investors who invest their money in exchange for equity. Moreover, Watts also provides the 2017 survey report in his article, the common source of the franchise funding in Canada was a commercial bank, personal and retirement funding. Hence, to conclude Watts mention all of the sources for franchise funding and ended the article with the most common source used by franchisees in Canada. On the other hand, Guillory can improve his article by adding up information about Private source of funding and also the most common source used by Canadians.

AUTHOR & YEAR

TITLE

SUMMARY

CRITICAL Analysis

Watts, 2016

Food Franchise Report 2016

●       Current operating franchise brands and units in Canada

Only describing current trends, can be improved by showing the diversity in the food franchise industry and the scope of the food franchise in Canada

Couillard,2019 Fast Food Restaurants in Canada

●       Describing the market share of major players, who gained the popularity of the food franchise industry in Canada

The article only shows the current major players of the food franchise industry. The article can also become more interesting by showing about the food franchise company who initially started the trend of franchise business in Canada

Franchise Canada report, 2018 2018 FranchiseCanada Franchising Trend Report

●       The current trend of food franchising in Canada

●       The millennials age group are showing more interest in investing in a food franchise business

The article can be improved by comparing the market trend of food franchising before and now.
IBIS World report, 2019 Fast Food Restaurants in Canada

●       Analysis of Fast-food Service Restaurants and Quick Service Restaurant in Canada

The study can become more efficient and reliable if the author mentions about the past and present scenario of food franchise industry in Canada.
Couillard,2019 Fast Food Restaurants in Canada

●       The article talks about the food franchise business cycle

●       Impact of Food franchise industry on Canadian GDP

Levitt, 2012 Taking Your Franchise to Canada

●       Impact of Food franchise business on the Canadian economy

All points were clearly reflected. Further, it can be improvised by showing the drawbacks of the food franchise industry on the Canadian economy.

Couillard,2019 Fast Food Restaurants in Canada

●       States  the regulation of licensing in Canadian food franchise industry

The article can provide a more in-depth analysis of various elements and key components of procuring a food franchise license.
Guillory, 2018 Should You Finance Your Franchise? Options to Consider

●       The article describes whether or not to finance the franchise and options to consider the same.

The article can develop by adding up information about Private source of funding and also the most common source used by Canadians.
Watts, 2018 Franchise Financing Options

●       All types of financing food franchise including public and Private.

The article can be developed more by adding up financing criteria in each type.