There are a number of issues that you should consider when starting a franchise system in Canada. The following are just a few of the issues that a potential franchisor should consider.
- To Franchise, or Not to Franchise?
To answer this question you will need to ask yourself further questions to determine if franchising your business makes sense. For instance, do you have a viable business model? Can you demonstrate that the system works?
The business of selling franchises and managing a franchise system will be different from your existing business. Therefore, you want to ensure that you have the necessary time, skills and financial resources to develop the new franchise business.
- Don’t Skimp on Legal Fees
You should seek the advice of a qualified lawyer experienced in franchise law to assist you with creating the applicable franchise disclosure document and related agreements. Having proper documents and agreements in place from the outset, can help you save costs in the long run.
- Disclosure, Disclosure, Disclosure
Each of the provinces of Ontario, Alberta, British Columbia, Manitoba, New Brunswick and Prince Edward Island have enacted franchise legislation. All such franchise statutes require franchisors to provide the prospective franchisee with a franchise disclosure document. Your trusted legal advisor can help you with the legal compliance of your disclosure document. Non-compliant or deficient disclosure gives rise to remedies for franchisees, which can be costly for the franchisor.
- Protecting your Trade-marks
In addition to protecting and licensing other forms of intellectual property, you should register your trademarks under the Trade-marks Act (Canada) as early as possible. Since you will be licensing the right to use your trademarks, you should seek the services of a licensed trademark agent to ensure that the trademark application(s) are properly prepared and filed.
- Legal Requirement of Good Faith and Fair Dealing
Among the various obligations required under the provincial franchise statutes, they provide for a statutory duty of good faith and fair dealing by both the franchisor and the franchisee. In general, franchisors are required to act promptly, honestly, fairly and reasonably.
- Adapting to Ongoing Changes
Changes to the franchise system can have legal implications that may necessitate changes to your franchise disclosure document and related agreements. Not only can your legal advisor help you with the launch of your franchise system, but he/she can guide and assist you with ongoing changes and the adaptation of those changes to your franchise agreements/documents.
- Established in a Different Jurisdiction
If you already have a franchise system in a different jurisdiction, for example in the United States, you will need to have your franchise agreements and documents carefully reviewed and modified to comply with Canadian and applicable provincial laws.
The lawyers in the business law group at Mills & Mills LLP represent both established franchisors and franchisees across Canada. Franchise law involves many important considerations, to benefit from the franchise expertise of our business law lawyers, please contact us at 416-863-0125 or send us an email.
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