What should I do before buying a franchise?
Buying a franchise is an attractive way of starting a business, as the franchisee is able to utilize the business methods and support offered by the franchisor, including trademarks, marketing strategies, accounting systems, procurement channels, etc.
Ontario is one of five Canadian provinces to have enacted franchise specific legislation in order to help franchisees make informed investment decisions. The main goal of the legislation is to provide potential franchisees with the right to comprehensive disclosure documents prior to entering into any contract with the franchisor. The franchisor must provide the franchisee with a disclosure document at least 14 days prior to the payment of any money and to the signing of any agreement (without exception) relating to the franchise.
In addition to items prescribed by the legislation which must be included, the disclosure document must also contain all material facts about the franchise and the franchisor. Generally this means facts that might reasonably be considered to have a significant impact on the decision to buy the franchise or which might significantly impact the price of the franchise.
There are many elements to consider when buying a franchise, both financial and legal and one would be well advised to find both an accountant and a lawyer that can provide independent financial and legal advice before making the decision to invest.