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2 “Buying” into the Franchise

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By the time a prospective franchisee appears in his or her lawyer’s office for advice concerning the acquisition of a franchise, one or more of the following things have likely occurred:

• The prospective franchisee has been to a trade show and has become interested in acquiring a particular franchise.

• The prospective franchisee has been surfing the Internet and has become interested in acquiring a particular franchise.

• The prospective franchisee has approached or been approached by a franchisor (or its sales agents) and has become interested in acquiring a franchise.

• The prospective franchisee has executed a deposit agreement and has paid between $2,000 and $10,000 towards the initial franchise fee (and has been given a copy of the formal franchise agreement to review).

• The prospective franchisee has signed the deposit agreement, paid a deposit, and executed the franchise agreement.

• The prospective franchisee has made or is about to make an offer to lease premises for the franchised business, including having paid or being about to pay a deposit to the landlord (or its leasing agents).

• The prospective franchisee has made or is about to make an arrangement to buy an existing franchise from another franchisee.

• The prospective franchisee has been given a copy of the franchisor’s disclosure document.

• In very bad situations, the franchisee has already signed the franchise agreement.

If you are considering buying into a franchise, you should talk to a franchise lawyer before you sign any documents or pay any deposits or fees. My recommendation is that it should be a lawyer with experience with franchise law. This chapter will help you understand why it is important to consult a franchise lawyer as early as you can in the franchising process.

Buying a Franchise in Canada

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