Your Franchise Agreement Checklist

Probably the best way to gauge how you will be treated once you join the franchise is to ask existing franchisees how they are being treated now.  Talk to as many franchisees as you can, so you are sure you are getting an accurate picture of things.  Ask them how long they owned their franchise, what they paid, what they think of the franchise system, and whether they are looking to sell (and if so, why).

Determine whether the franchisor is engaged in a lot of litigation.  While a certain amount of litigation is unavoidable, excessive litigation can be a warning sign. Canadian legal decisions can be accessed for free at canlii.org. Keep in mind that many disputes are settled by private arbitration or mediation, and these decisions are not available on-line.

When you find a franchise you think you want to buy, make sure you understand exactly what you are getting.  Remember, you are only buying what is stated in the franchise agreement and the lease, so check those documents carefully.

In the franchise agreement, some things to check are:

  • How long is the franchise grant?
  • Are you granted an exclusive territory?  If so, what is it?
  • Do you have renewal rights?  If so, how long, and how are they triggered?
  • Does the franchisor promise training?  Who pays the costs?

Some points to check in the lease are: rent amount, the duration of the lease, whether you can renew (and if so, when and for how long), how to trigger renewals, and how the rent will increase in future. These are important things to consider for any franchise purchase. If you need help with your franchising agreement contact Law Works your franchise dispute lawyer in Vaughan.

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