133 Pages
English

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Buying a Franchise in Canada

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Description

This book is essential reading for anyone thinking about taking over an existing business. Tony Wilson will help you choose a franchise that’s right for you, understand your franchise agreement inside and out, and negotiate the best deal. This book will give you a better understanding of the legal issues and help you to spot problem areas.
In an easy-to-understand manner, the author shows you how to negotiate an agreement with a franchisor and develop a profitable relationship. The author takes you step-by-step through a franchise agreement so you can spot the potential benefits and drawbacks.
Tony Wilson is a franchise lawyer and considered one of the foremost experts on franchising in Canada. He has written this book in a manner that offers you practical and common-sense advice you can use. The book contains many real-life examples taken from the author’s experiences representing franchisees. It will answer your questions about franchising, saving you time and money in lawyer’s fees. The book answers the following questions:
* What parts of a franchise agreement are negotiable? How protected is a “protected” territory?
* How can you discover the status of the franchisor’s trade-marks?
* Who will control the lease for the franchised location?
* How easy will it be for the franchisee to resell or renew the franchised business?
INTRODUCTION xv
PART 1: THE BASICS OF FRANCHISING 1
1 UNDERSTANDING FRANCHISING 3
1. What Is Franchising? 3
2. Is a License Agreement the Same as a Franchise Agreement? 5
3. A Brief History of Franchising 5
4. US Disclosure Agreements and Regulations 6
5. Are US-Based Franchisors Required to Give Canadian Franchisees
Disclosure Documents? 7
6. Has the US Agreement been Converted to a Canadian Agreement? 8
7. Labour Issues 10
8. Good Faith, Fairness, and Reasonableness 11
2 “BUYING” INTO THE FRANCHISE 13
1. Who Are You Dealing With? 14
2. Deposit Agreements 15
2.1 Who holds the deposit? 15
2.2 Ontario and Alberta regulations on deposits 17
3. Is the Initial Fee and Other Costs in US or Canadian Dollars? 21
4. Royalties 22
5. Withholding Taxes on Royalties 22
6. Limited Liability Company 23
7. Your Personal Liability 24
7.1 Husband and wife as “franchisee” 25
8. Does the Franchisor Own the Trade-marks? 26
3 MASTER FRANCHISING 27
1. What Is Master Franchising? 27
2. Cost of Becoming a Master Franchisee 29
3. Performance and Development Obligations of the Master Franchisee 30
4. Negotiating a Unit Franchise Agreement with a Master Franchisee 31
v
CONTENTS
PART 2: THE FRANCHISE AGREEMENT 33
4 EVERYTHING YOU EVER WANTED TO KNOW ABOUT
A FRANCHISE AGREEMENT BUT WERE AFRAID TO ASK 35
5 GRANT AND TERM 43
1. Grant and Term 43
1.1 Grant of Franchise Rights 43
1.2 Franchised Location 44
1.3 Limitation on Territorial Protection 44
1.4 Right of First Refusal 45
1.5 Reservation of Rights to the Franchisor 47
1.6 Term and Effective Date 50
1.7 Renewal 51
1.8 System Change 55
1.9 Owner-Operator 56
6 TENANCY AND DEVELOPMENT 57
2. Tenancy and Development 57
2.1 Sublease of Franchised Location Premises from the Franchisor 57
2.2 Lease of Franchised Location Premises Directly by the Franchisee 59
2.3 Development of Franchised Location Premises by the Franchisee 61
2.4 Requirements of Opening of Franchised Location where
Franchisee has Developed Premises 63
2.5 Development of the Franchised Location Premises by the Franchisor 63
7 PRODUCTS AND SUPPLIES 67
3. Required Products and Supplies for an Emma & Jeremy’s Internet
Café & Donut Emporium 67
3.1 Required Purchase and Use of Equipment and Signs 67
3.2 Software Program(s) and Designated Hardware 68
3.3 Equipment Leases 69
3.4 Approved Suppliers 69
3.5 Allowances to the Franchisor 70
3.6 Payment Irregularities 70
3.7 Substandard Supplies 71
3.8 Suggested Prices 71
vi Buying a Franchise in Canada
8 FEES AND REPORTING 72
4. Fees and Reporting 72
4.1 Initial Franchisee Fee 72
4.2 Continuing Royalties 74
4.3 Quarterly Reporting 76
4.4 Annual Reporting 76
4.5 Verification and Audit Rights 77
4.6 Overdue Payments 78
4.7 All Payments Net to the Franchisor 78
9 ADVERTISING 79
5. Advertising 81
5.1 Advertising Compliance 81
5.2 Opening Promotion/Store Opening Costs 81
5.3 Local Advertising Obligation 81
5.4 Promotion Programs 82
5.5 Franchisor’s Advertising Methods and Materials 82
5.6 Regional Co-operative Advertising 83
5.7 Yellow Pages Advertising 83
5.8 Advertising Fund 84
5.9 Administration of Costs and Accounting by the Franchisor 84
10 INTELLECTUAL PROPERTY: TRADE-MARKS, TRADE SECRETS,
AND COPYRIGHT 86
6. Intellectual Property 87
6.1 Licensed Rights 87
6.2 Use of Trade-mark 87
6.3 Other Trade-marks 88
6.4 Operations Manual 89
6.5 Confidential Information 90
6.6 Environmental and Health Standards Respecting Food
Handling and Disposal 91
11 THE OBLIGATIONS OF THE FRANCHISOR AND FRANCHISEE 92
7. Training 92
7.1 Training of the Franchisee 92
8. Franchisor’s General Obligations 94
8.1 General Obligations 94
Contents vii
9. Franchisee’s Continuing Obligations 96
9.1 Obligations 96
12 TRANSFER AND ASSIGNMENT OF YOUR FRANCHISE 101
10. Transfer and Assignment 101
10.1 Assignment by the Franchisor 101
10.2 Assignment by the Franchisee 102
10.3 Conditions of Assignment 103
10.4 Assignment Fee 105
10.5 Right of First Refusal 105
10.6 Transfer of Shares of Corporate Franchisee 107
10.7 Death or Incapacity of the Franchisee 107
13 DEFAULT AND TERMINATION 109
11. Default and Termination 109
11.1 No Encumbrance of Franchise 109
11.2 Effect of Seizure or Insolvency 109
11.3 Rectification of Defaults 110
11.4 Termination after Notice of Default 110
11.5 Termination without Prior Notice of Default 112
11.6 Cross Default 115
11.7 Right of the Franchisor to Repurchase 115
11.8 Telephone Numbers and Listings 117
11.9 No Removal of Assets 117
11.10 The Franchisee’s Obligations of Discontinuance upon Termination 118
11.11 Indemnification 118
11.12 Non-Competition 119
11.13 No Solicitation of Customers, Employees, Suppliers, or the
Franchisees 122
11.14 Injunctive Relief 122
11.15 Mediation 123
11.16 Arbitration 123
14 THE GUARANTEE AND GENERAL INFORMATION 125
12. Guarantee 125
12.1 Guarantee by Guarantor(s) of Franchisee’s Obligations 125
viii Buying a Franchise in Canada
13.General 127
13.1 Cumulative Remedies 127
13.2 Waiver 127
13.3 Entire Agreement 127
13.4 Recitals 128
13.5 Modification of Agreement 128
13.6 Covenant to Execute Further Documents or Acts 128
13.7 Relationship of Parties 128
13.8 Severability 129
13.9 Curtailment of Provisions 129
13.10 Choice of Law 130
13.11 Survival of Covenants 131
13.12 Interpretation and Liability 131
13.13 Without Limitation 131
13.14 Other Documents Included 131
13.15 No Withholding 132
13.16 Not Binding Unless Signed by Franchisor 132
13.17 Time of Essence 132
13.18Notices 132
13.19Enurement 133
13.20 Submission of Agreement 133
13.21 Risk 133
13.22 No Inconsistency 134
13.23 Definitions 134
13.24 No Reliance by the Franchisee 138
PART 3: THE DISCLOSURE DOCUMENT 143
15 DISCLOSURE IN CANADA 145
1. Ontario and Alberta Disclosure Documents 145
1.1Alberta 145
1.2Ontario 146
2. What Must Go in a Disclosure Document? 147
3. What Happens If the Franchise Agreement Is Called a License
Agreement? 149
Contents ix
16 ALBERTA AND ONTARIO DISCLOSURE DOCUMENT 150
1. Franchisor Information/Business Background 152
2. Previous Convictions and Pending Charges 158
3. Civil Litigation and Liabilities 158
4. Administrative Proceedings and Existing Orders 158
5. Bankruptcy 158
6. Nature of the Business 159
7. Franchisee’s Costs Associated with Establishment of the Franchise 161
8. Restrictions on Sources of Products and Services 162
9. Rebates and Other Benefits to the Franchisor 162
10. Financing 162
11. Training 162
12. Advertising and Marketing 163
13. Obligation to Participate in the Actual Operation of
the Franchise Business 164
14. Renewal, Termination, Transfer, and Dispute Resolution 164
15. Licenses Required 164
16. Existing Franchisee and Franchisor Outlets 164
17. Franchise Closure 165
18. Earnings Claims and Estimate of Annual Operating Costs 165
19. Trade-marks 166
20. Mediation 166
21. Territory 167
22. Notice of Rescission and Effect of Cancellation (Alberta) 167
23. Financial Statements 168
Certificate 168
GLOSSARY 169
SAMPLES
1 Deposit Agreement (Ontario) 19
2 Schedule A 141

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Published by
Published 15 April 2012
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EAN13 9781770408661
Language English

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