Many Canadian franchisors assume that what works in Canada will seamlessly translate to the US market, but differences in regulations, consumer behavior, and business practices often lead to unexpected obstacles. Some of these issues are avoidable with proper planning, while others require ongoing adjustments. Below are five of the most common mistakes Canadian franchisors make when entering the US—and how to avoid them.
Failing to adapt the franchise system to the new market
A key mistake many franchisors make is assuming that your business model, branding, and operations can be replicated in the US without modifications. While franchise consistency is important, localization is just as critical.
Evaluate if your products, pricing, and service models align with US consumer preferences. Additionally, supply chains can present challenges. Will your existing suppliers be able to meet US demand? Do you need local vendors to ensure quality and cost-efficiency? Real estate is another factor—what works in Canada may not be ideal in different US regions. If your standard location is 2,000 square feet, will that size make sense in higher-rent markets like New York or Los Angeles? These considerations must be part of your expansion strategy.
Neglecting Trademark and Intellectual property protection
Your franchise’s most valuable asset is its brand, yet many franchisors fail to adequately protect their trademarks and intellectual property when expanding internationally.
Your brand’s name, logo, recipes, processes, and marketing strategies all contribute to the goodwill and value of your franchise. Without legal protections in place, you risk losing control over how your brand is used—or worse, seeing it exploited by others. Consider whether any modifications to your trade dress may be required when entering the United States – the market South of the border is far more competitive than in Canada, so you need to ensure that you can adequately protect your brand’s intellectual property when expanding internationally.
Before entering the US, you should:
- Register your trademarks in the US to prevent legal disputes.
- Establish strong franchise agreements that outline how franchisees can use the brand.
- Work with an attorney to ensure compliance with US intellectual property laws.
Ignoring US tax and corporate structure considerations
Expanding into the US requires careful planning around corporate structuring and tax obligations. Many Canadian franchisors overlook these critical issues, leading to unnecessary financial burdens.
Key tax considerations include:
- How will franchise fees, royalties, and brand contributions be taxed in the US?
- Will you need to establish a US-based entity to streamline financial operations?
- Will your US-based entity be owned directly by you from Canada, or will you create a US ownership structure?
- How can you repatriate earnings to Canada in the most tax-efficient way?
Tax laws vary by state, and improper structuring could result in double taxation or compliance issues. Consulting an international tax expert before expansion ensures that your business is set up in the most economically advantageous way.
Choosing the wrong local partner or expansion model
Expanding into a new country often requires finding the right local partners to assist with development. If you are franchising directly, working with a master franchisee/area representative, or entering into a joint venture, choosing the right people to represent your brand is crucial.
Many Canadian franchisors struggle with:
- Finding a master franchisee or area representative who aligns with their vision.
- Ensuring local partners have the necessary market knowledge and the ability to help you scale in the United States.
- Establishing clear alignment on growth expectations and operational standards.
An ideal partner should not only understand the local market but also share your commitment to quality and brand integrity. Due diligence in selecting expansion partners can mean the difference between success and failure.
Providing insufficient support to US franchisees
One of the biggest challenges in international franchising is maintaining strong franchisee support. You might find it difficult to provide the same level of training and assistance to US franchisees as you do in Canada, especially if you are still an emerging brand in the Canadian market.
US franchisees will need ongoing training, marketing guidance, and operational support to succeed. Even if a master franchisee or area representative is handling local operations, franchisors must ensure that brand standards are upheld.
To strengthen support, consider:
- Investing in strong training programs tailored for US operations.
- Providing dedicated field support teams for US locations, whether directly or through a master franchisee / area representative.
- Leveraging technology to offer virtual training and real-time assistance.
Franchisees expect value in return for their investment. Ensuring they have the resources they need to succeed ultimately strengthens the entire franchise system.
Final thoughts
Expanding a franchise system into the US presents incredible opportunities but requires careful planning and execution. By avoiding these five common mistakes—failing to adapt the system, neglecting brand protection, overlooking tax issues, choosing the wrong partners, and providing inadequate support—you increase your chances for success.
Understanding the complexities of US expansion requires expert guidance. At Spadea Lignana, we help franchisors handle this transition smoothly with proper legal, financial, and operational strategies and have assisted many Canadian brands in their expansion into the United States. For more insights, explore our International Franchising video series. If you’re considering expanding your franchise south of the border, having the right professional support is essential for long-term growth.
