Service Overview
Focused legal support for drafting a franchise agreement
A franchise agreement sets out the terms on which a business owner licenses a brand, operating system, and trademarks to an independent operator. It defines the relationship between the franchisor and franchisee, including fees and royalties, operating standards, dispute procedures, and the consequences of default.
In Ontario, the agreement must also be considered alongside the disclosure obligations under the Arthur Wishart Act (Franchise Disclosure), 2000. Where disclosure is required, preparing the franchise disclosure document is an important part of establishing the franchise system.
The drafting process
Preparing the franchise documents may involve:
- Understanding the business: Reviewing the business model, profit structure, expansion plans, and intellectual property that the franchise arrangement will use.
- Structuring the financial terms: Defining initial franchise fees, ongoing royalties, marketing fund contributions, and transfer fees in clear contractual terms.
- Drafting the franchise agreement: Addressing operating standards, exclusive or non-exclusive territory rights, restrictive covenants where appropriate, default procedures, and termination rights.
- Preparing disclosure materials: Compiling the information required for the franchise disclosure document, including relevant corporate history, litigation background, information about directors, and required financial information. Any financial estimates or projections must be considered within the applicable disclosure requirements.
- Finalizing the documents: Reviewing the complete package and advising on its use with prospective franchisees, including any applicable disclosure obligations before signing or payment.
How we can help
Our office assists with:
- Tailored documents: Preparing franchise agreements and disclosure documents that reflect the client’s industry, operating model, and commercial objectives.
- Brand and intellectual property protection: Defining how the brand, trademarks, and operating standards may be used, and addressing breaches that could affect the franchise system’s reputation.
- Disclosure compliance: Reviewing the documents against applicable statutory requirements to help reduce the risk of disclosure disputes and related claims.
- Growth planning: Advising on territory arrangements, renewal terms, and supply-chain provisions so the written agreements support the planned development of the franchise system.