Certain Elements To Be Considered By A Franchise Expanding to Quebec

Certain hesitant franchisors often perceive that the province of Quebec is a difficult market to conquer or even penetrate. Linguistic questions as well as the distinct Civil Law regime may be perceived by certain franchisors as obstacles or challenges that are difficult to surmount.

Here is a review of certain elements that, in our opinion, must be considered by a franchisor wishing to establish himself in the province of Quebec:

1. Demographic and geographic elements:

1.1 Quebec is one of Canada’s ten provinces. Canada also includes three territories;

1.2 Canada’s population is approximately 33 million and Quebec represents approximately 25%, that is, approximately 8 million habitants;

1.3 The province of Quebec is situated more or less at the center of Canada, immediately next door to Ontario, which is itself Canada’s most populous province, with a population of over 13 million. Quebec and Ontario represent together more than half of the Canadian population;

1.4 Quebec’s unemployment rate as of January 2012 is 8.4% and Canada’s unemployment rate as of January 2012 is 7.6%;

1.5 The economic centers of the Province of Quebec are:

1.5.1 The Montreal metropolitan area, including Laval to the North and Longueuil to the South;

1.5.2 The city of Quebec;

1.5.3 Certain larger cities including Trois-Rivières, Sherbrooke and Gatineau.

2. Language details:

2.1 The Montreal metropolitan region is particularly cosmopolitan and Quebec as a whole is a bilingual province wherein French and English are both spoken:

2.1.1 The percentage of people in the province of Quebec who spoke both French and English was 49% in the year 2006;

2.1.2 The percentage of people in the province of Quebec who spoke English and another language was 17.1% in 2006;

2.1.3 The percentage of people in the province of Quebec who spoke French and another language was 26.3% in 2006;

2.1.4 The percentage of people in Canada outside of the province of Quebec who spoke French and English was 16.7% in 2006.

3. Legal environment:

3.1 The Civil Law system in the province of Quebec is different from that which exists in the other nine provinces and three territories. In effect, the Civil Code of Quebec regulates private relations between persons, whereas in the rest of Canada there is a Common Law system that is similar to what is found in the most of United-States;

3.2 Many of the laws that have a direct impact on franchising are from the federal Parliament and therefore come from Common Law, including the Competition Act, the Bankruptcy and Insolvency Act, the Weights and Measures Act, the Trade-marks Act, the Copyright Act, the Customs Act, the Excise Act, the Interest Act and others;

3.3 Quebec also has a law to protect the French language, the Charter of the French Language;

3.4 Quebec also has a Consumer Protection Act which was enacted by the provincial legislature.

4. Competent and efficient judicial systems:

4.1 Territorial jurisdiction:

4.1.1 Quebec courts respect the choices made by the parties to submit their disputes to a jurisdiction other than the province of Quebec as well as to be regulated by a law other than that of the province of Quebec;

4.1.2 The courts have on many occasions confirmed that they will respect arbitration clauses by which the parties have, by contract, agreed to submit disputes to arbitration to the exclusion of the ordinary courts.

5. Absence of specific franchise legislation:

5.1 While there are five Canadian provinces that have laws specifically regulating franchises, (Alberta, Manitoba, Ontario, New Brunswick and Prince Eduard Island) Quebec regulates franchise only by reference to the general dispositions of the Civil Code of Quebec.

6. Franchising organizations:

6.1 The Canadian Franchise Association (CFA) is a pan Canadian organization which devotes itself to the promotion of franchising as well as lobbying at various governments levels. The CFA has also allied itself with international franchise organizations having similar goals;

6.2 The Quebec Franchise Council (CQF) has similar goals to the CFA but concentrates its activities in the province of Quebec;

6.3 There are up to two franchise shows per year in the province of Quebec, one of which is organized by CFA and the other by CQF.

7. A network of competent and efficient professionals:

7.1 Quebec has important networks of lawyers, accountants, geomarketing specialists and consultants, as well as market research specialists working in the area of franchises, and their activities are of high quality on the provincial and national levels as well as on the international levels.

8. An efficient network of banks and financial assistance programs:

8.1 Almost every major financial institutions operating in Quebec employs specialists whose job it is to serve the world of franchising, specifically in:

8.1.1 Obtaining financing for franchisors who wish to gain a foothold in Quebec;

8.1.2 Working to establish programs to assist potential franchisees in acquiring franchises;

8.1.3 Coordinating the different available financial resources, including financial guarantees available from government to assist the acquisition of franchises and therefore also encourage the growth of franchise networks in the province of Quebec;

9. Political context:

9.1 The political climate is calm and stable both on a federal and provincial level, making the environment favourable to investors, in that:

9.1.1 Canada is a federation;

9.1.2 The political system is a parliamentary system of British tradition;

9.1.3 Canada is a capitalist system, even though both at the provincial and federal level, there are certain socialist elements, such as the health system, the educational system, as well as the taxation system;

9.1.4 Both federal and provincial governments are eager to stimulate the economy and offer various incentives, including tax incentives, in order to encourage the creation and growth of private enterprise.

10. Labour availability:

10.1 The entrepreneur will find:

10.1.1 An educated work force;

10.1.2 A network of educational institutions capable of producing graduates who fill the needs of industry;

10.1.3 Employees who very often are bilingual and even trilingual;

10.1.4 Significant manpower available on a part time basis, mostly constituted by students, as well as some retirees.

11. Franchising is a well-known business model in the province of Quebec:

11.1 315 franchisors are presently operating in the province of Quebec, excluding automobile manufacturers;

11.2 Adding up all the franchise networks, there are presently 11 366 franchises operating in the province of Quebec;

11.3 These franchise networks employ over 170 000 people;

11.4 More than 50% of all retail sales are made in franchise stores;

11.5 As a portion of the Gross Domestic Product (GDP), franchises represents 8.68%;

11.6 Business conducted in the franchise networks represents 23.78 billions of dollars per year.

As a result we can conclude the following:

1. The franchising business model is well established in the province of Quebec;

2. The socioeconomic and political environment is very favourable to the creation and growth of a franchise network;

3. The legal environment is also very favourable to this business model. If you require further information, please do not hesitate to contact us.

Disclaimer: This article contains legal information of a general nature and cannot replace legal advice given by a lawyer who will examine the details of your particular situation.