The hidden economic might of Canadian franchises

When people think of the key pillars of the Canadian economy, they often point to the country’s vast natural resources, our resilient manufacturing base, or the stability of our financial sector. But there’s another powerhouse hiding in plain sight that’s a critical contributor to Canada’s GDP: franchises.

With more than 1,200 franchise networks operating in Canada, franchising is so deeply woven into our everyday lives that many people may not even realize they’re dealing with one. The average Canadian interacts with between three and five franchises a day; $1 out of every $5 spent on a good or service goes to a franchise.

These companies are diverse, too. While hospitality-related franchises such as restaurants make up about 40% of the sector, franchising touches almost every aspect of the economy, including retail, gyms, convenience stores, construction firms, gas bars, educational services and home improvement brands.

In 2026, franchising is expected to contribute about $133 billion to the economy, equal to roughly 5% of Canada’s GDP. An important distinction however that is often misunderstood is that franchising is a business model, not an industry. If franchising were classified as an industry in Canada, like energy or financial services, it would rank as the eighth-largest contributor, just behind public administration and ahead of education. Yet despite its scale and importance, it’s often overlooked compared to more traditional sectors.

“There’s not necessarily a common theme around barriers to growth across the varied different industry types of franchise businesses,” says Kelly Blankstein, Chief Financial Officer at A&W Food Services of Canada Inc. “As a result, there tends to be less government relations and advocacy from purely franchise-based associations, although there is some.”

That inability to speak in a unified voice as a single industry makes it harder for both franchisees and franchisors to address the challenges that can impede growth. And since franchises are a major employer and gateway into entrepreneurship, that fragmentation has significant implications for the broader Canadian economy. That’s where other industry associations like Restaurants Canada would step in, but not all restaurants are franchise models.

Economic headwinds creating challenges for franchises

Inflation has been a persistent challenge for the Canadian economy over the past few years, and it continues to be a headwind for franchises, as margins are squeezed and owners try to avoid passing higher input costs on to customers for fear of driving them away.

As one trade publication covering franchising notes, leading franchisors are also looking to adjust supply chains or tweak their offerings amid global trade uncertainty.

To support its franchisees, A&W is constantly developing new concepts and evolving its formats, including locations that cater more to transit-oriented consumers in dense urban areas, and investing in mobile apps and proprietary technology. “It’s a tough economic environment for everyone in the restaurant space,” says Blankstein. “We’re doing absolutely everything we can to create top line growth as well as carefully examine every dollar we spend so that we can make our franchisees’ businesses as profitable as possible.”

For Boston Pizza, working with franchisees to keep costs in check is vital for success. Unless the franchisee owns the property, rising rental rates can put pressure on the business. A reasonable benchmark for the industry is for rent to cost about 8% of sales, explains Felix DeCata, Boston Pizza’s Senior Vice-President for National Development, although it can be higher in urban centres. If that figure climbs to 12%, that’s a red flag, he says.

Franchises are vital to youth and growing communities

Few sectors in Canada have more of an impact on the job market than franchising. While one in 10 Canadians – roughly 1.5 million – currently works for a franchise, millions more can also say they did at some point in their lives. For many, it was their first job, especially in the many smaller communities dotted across the country, where franchises are often one of the few employers able to hire students.

“So many people have started their careers in food service and hospitality,” says Blankstein. “Not only does it start you off and give you a job as a young person, but I think it gives you a lot of skills on how to manage people, provide excellent guest relations, handle incidents and resolve problems, which benefits you no matter what path you go on to later on in your life.”

A CIBC analysis shows that with elevated unemployment rates expected to persist, particularly in populous provinces like Ontario and Alberta, franchise owners may find it easier to source labour without too much wage pressure, which should help this market continue to grow.

Still, Blankstein believes franchises could play an even larger role in the Canadian economy if they had a little extra support. Some franchises struggle to recruit and retain staff, particularly in rural communities and for entry-level roles, where wages and hours are seen as less attractive. “Government needs to sponsor and support small business with these types of labour challenges in Canada to make us more competitive,” she says.

Franchises help Canadians generate wealth

Beyond being a place for students to gain valuable work experience, franchising is also a pathway for many new Canadians – not as employees but as owners. “There are a lot of skilled people coming from other countries that want to come here, but they may not have their professional designations recognized,” she says. “But they can work hard, so the franchise path offers them a nice, lower-risk way to get into business for themselves.”

Franchising offers entrepreneurs a proven model and a network to help train staff and market the business, while lowering the amount of capital and investment needed to get started. The franchisor role is to help franchisees build their capabilities, provide services and support and scale so they can focus on their core business of serving guests, says Blankstein.

While running a successful franchise can be extremely rewarding, most would-be owners would find it difficult to pull together the entire amount of capital they need to get started with their first franchise. A lot of entrepreneurs have enough equity to get into a franchise, says Blankstein, with a sizable portion of the up-front contribution coming from debt. And as the business evolves, other capital requirements are often funded from a mix of debt and equity.

Boston Pizza, for its part, is addressing this challenge through its BP Match program, which connects investors with operators. A franchise for a Boston Pizza restaurant could be up to $2.5 million, an expensive venture for someone to finance on their own. If you have the operational experience but don’t have the financial means, Boston Pizza will help source a financial partner for you.

“We’ve had a lot of success trying to match people together within our system,” explains DeCata.

Running a franchise is hard, but rewarding

Once a franchisee has one successful location, they can start growing their wealth by adding more units to gain scale and share resources like HR and finance to lower costs. Some even use their scale to open adjacent businesses, provided they’re not a direct competitor. “Some of our franchisees have an A&W, some of them have Wendy’s or Canadian Tire franchises as well,” says DeCata. “If you work with any one of those brands, you understand the structure, you understand the franchising program and for us, it’s a benefit.”

Becoming a franchisee can lay out a clear path for success, but you have to be willing to do the work. “Some people come at it thinking that it’s a proven system in a franchise model and therefore plug and play,” Blankstein says. “I don’t think that’s true in any of the franchise models; you have to be willing to work very hard and if you do you will be rewarded for your efforts.”

While franchise owners have never shied away from hard work, they’ll need to step up their efforts to ensure what has become a vital part of the economy can be sustained. From filling entry-level roles to adopting modern digital tools, the sector faces a number of hurdles. Whether through hiring incentives, support for technology investments or making it easier for people to enter the industry, government and business must work together to strengthen this key pillar of Canada’s economy.