Know Your Franchisee Obligations and Rights

Franchise agreements (and associated leases) are typically long-term contracts, so make sure you know what your obligations are.  For example:

  • What royalties do you have to pay? Are they dependent on sales? Net or gross sales?
  • How much are the advertising contributions? Can the franchisor use them only for advertising, and are franchisees entitled to an accounting?
  • Does the franchisor keep rebates on supplies, or are they passed down to the franchisees?
  • Do franchisees have a say in how the franchise is run?

Franchise law is complex and differs in each province and territory in Canada. For example Ontario law, which applies to any franchise operated wholly or partly in Ontario, has the following notable points:

  • A franchisor must typically provide a disclosure document to prospective franchisees.  The franchisee must be given it at least 14 days before he/she pays any money or signs anything;
  • A franchisee may have certain legal remedies if the disclosure document contains inaccurate information or if one isn’t given at all;
  • Franchisors may be liable to franchisees for misrepresentations made in the disclosure document;
  • Franchisors cannot stop franchisees from associating with other franchisees; and,
  • Both franchisors and franchisees must act with “good faith” and deal fairly with each other.

If you need help with franchising dispute or franchise law contact Law Works. Franchise lawyers in Mississauga who can help with all your business needs.

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