Before You Sign That Franchising Agreement

Make sure you understand all the legal documents regarding buying a franchise before meeting lawyers.

Toronto Star:

Buying a small franchised business in Ontario is becoming more common than ever. This is not surprising given the benefits of franchising, such as brand recognition, access to an established system, initial training and ongoing support, and many other benefits that a franchisee may receive from a reputable franchisor.

If you are considering, or are in the process of, purchasing a franchised business, you will receive a package of franchise legal documents sometime in the process of your investigation of the franchise. This package of materials is called a Disclosure Document.

A franchisor is required to provide it to you at least 14 days before you sign any binding agreement in relation to the franchise or before you pay any monies or deposits to the franchisor or its affiliates in relation to the franchise.

This is a key requirement of Ontario’s franchise disclosure legislation, which sets out the details of what needs to be contained in the Disclosure Document.

In addition to the main part of the Disclosure Document, the package will include a copy of all agreements that you will be required to sign as part of your purchase of the franchised business, including the franchise agreement.

There may likely be some other documents, such as a general security agreement, lease agreement, sublease agreement, and possibly several others.

The most important document, though, is the franchise and disclosure agreements.

Key elements of a franchise agreement…

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