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A Franchise Agreement is a contract between a Franchisor and a Franchisee. Under the agreement, the Franchisor transfers use of rights, intellectual property, and information to the Franchisee for business use. A Franchise Agreement is imperative for any Franchise.
Franchisors and Franchisees can be structured as either:
Normally, they are both structured as corporations. However, it may be possible that the Franchisor is a corporation and the Franchisee is a sole proprietor.
The Franchisee will pay the Franchisor an initial fee and ongoing royalty fees (payment on sales) to become part of the business. The Franchisor will continue to oversee the Franchisee's business operations and provide ongoing advice.
There are many benefits of a Franchise. The Franchisor can expand their market and business quicker, and the Franchisee can do business with an established business name and reputation. Franchises can be either master franchises with multiple outlets or a single outlet at a specific location.
HOW TO USE THIS DOCUMENT
The Franchisor and Franchisee should fill out this document once all important details of the relationship are established. Important details include the franchise fee, the ongoing fees, the level of oversight from the Franchisor, initial training, location of training, and more.
After the document is complete, the Franchisor and Franchisee must sign and date the agreement. Each party needs to keep a signed copy for their own records.
In Ontario, Manitoba, British Columbia, Alberta, New Brunswick, and Prince Edward Island, before the Franchisee can invest in the Franchise and sign this agreement, they must receive a franchise disclosure document and a certificate from the Franchisor. These documents outline information about the franchise including the business structure, the length of time the franchisor has been in business, the number of franchises sold, and more.
Franchise legislation is based on disclosure laws. Not every Province and Territory will have them. Disclosure laws apply in Ontario, Manitoba, British Columbia, Alberta, New Brunswick, and Prince Edward Island. Quebec has its version of rules governing franchise agreements, called contracts of adhesion.
For example, in Ontario, the governing law is the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3. Disclosure law requires Franchisors to deliver to prospective Franchisees a certified franchise disclosure document that outlines information about the franchise. The information includes the business structure, the length of time the franchisor has been in business, the number of franchises sold, and more.
In Provinces and Territories without disclosure laws, it is not mandatory to deliver to prospective Franchisees a certified franchise disclosure document. However, most Franchisors will still provide this information to incentivize investors.
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Other names for the document: Franchise Contract, Agreement of Franchise, Contract of Franchise, Franchising Contract, Franchising Agreement
Country: Canada (English)