Buying a Franchise in Canada

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Tony Wilson. Buying a Franchise in Canada

BUYING A FRANCHISE IN CANADA. Understanding and Negotiating Your Franchise Agreement

Foreword

Introduction

Part 1. THE BASICS OF FRANCHISING

1. Understanding Franchising

1. What Is Franchising?

2. Is a License Agreement the Same as a Franchise Agreement?

3. A Brief History of Franchising

4. US Disclosure Agreements and Regulations

5. Are US-based franchisors required to give Canadian franchisees disclosure documents?

6. Has the US Agreement been Converted to a Canadian Agreement?

7. Labour Issues

8. Good Faith, Fairness, and Reasonableness

2 “Buying” into the Franchise

1. Who Are You Dealing With?

2. Deposit Agreements

2.1 Who holds the deposit?

2.2 Ontario and Alberta regulations on deposits

Sample 1: Deposit Agreement (Ontario)

3. Are The Initial Fee and Other Costs in US or Canadian Dollars?

4. Royalties

5. Withholding Taxes on Royalties

6. Limited Liability Company

7. Your Personal Liability

7.1 Spouses as “franchisee”

8. Does the Franchisor Own the Trade-marks?

3. Master Franchising

1. What is Master Franchising?

2. Cost of Becoming a Master Franchisee

3. Performance and Development Obligations of the Master Franchisee

4. Negotiating a unit franchise agreement with a Master Franchisee

Part 2. THE FRANCHISE AGREEMENT

4. Everything You Ever Wanted to Know About a Franchise Agreement But Were Afraid to Ask

5. Grant and Term

6. Tenancy and Development

7. Products and Supplies

8. Fees and Reporting

9. Advertising

10. Intellectual Property: Trade-Marks, Trade Secrets, and Copyright

11. The Obligations of the Franchisor and Franchisee

12. Transfer and Assignment of Your Franchise

13. Default and Termination

14. The Guarantee and General Information

Sample 2: Schedule A

Part 3. THE DISCLOSURE DOCUMENT

15. Disclosure in Canada

1. Ontario and Alberta Disclosure Documents

1.1 Alberta

1.2 Ontario

2. What Must Go in a Disclosure Document?

3. What Happens If the Franchise Agreement Is Called a License Agreement?

16. Alberta and Ontario Disclosure Document

Glossary

Acknowledgments

About the Author

Notice to Readers

Self-Counsel Press thanks you for purchasing this ebook

Contents

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There are books out there about franchising for people seeking to buy a franchise. The problem is, most of them are American and deal with US concepts that are not necessarily relevant to Canada and the way franchising operates in this country. The Canadian legal books that I am aware of are excellent, but deal with franchising from the perspective of the franchisor. These books are instructive if you are the one starting the franchise, but not as helpful if you are the franchisee seeking to buy the franchise. As well, most of them are for lawyers.

There was nothing that I was aware of (when I started this book) that was written to assist franchisees in making the single biggest investment of their lives. This book was written to help those people understand some of the legal issues prospective franchisees must be aware of before they acquire a franchised business. The first edition of this book sold over 4,000 copies and I continue to receive emails from Canadians thanking me for writing it and helping them to understand the pros and cons of becoming a franchisee in Canada.

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Reading this book and using a lawyer (even a franchise lawyer) is no guarantee that you will get the deal you want from a franchisor, and it’s certainly no guarantee that your franchised business will be successful. Success is often a function of many things, including the skills at operating the franchised system and inclination to work hard building the business. (Just because the investment goes sideways does not mean the franchisor is at fault. It may be that you are not the “right franchisee” for this particular franchise or perhaps any franchise at all.)

This book will help you be better informed to make the decision to acquire a franchise. At the very least, it will give you a better understanding of the legal issues surrounding perhaps the single largest business venture in which you might ever be involved. At the very most, it may assist you in spotting problem areas and allow for negotiation of these agreements with the franchisor. Purchasers of this book are invited to contact me for assistance, should the need arise. You can email me at tonywilson1@mac.com or twilson@boughton.ca, or telephone me at 604-684-1800. As I do this for a living, I encourage enquiries from prospective franchisees from across Canada (as long as you appreciate that I do this for a living).

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