The Arthur Wishart Act (Ontario's franchise legislation) requires a disclosure document be provided to all prospective franchisees at least 14 days in advance of the earliest of:
- the prospective franchisee signing any agreement relating to the franchise; and
- any payment of consideration on behalf of the prospective franchisee to the franchisor or franchisor's associate relating to the franchise.
No Obligation Refundable Deposit Exception - An exception exists that permits a prospective franchisee to pay consideration to a franchisor if, the payment:
- is a maximum of 20% of the initial franchise fee, to a maximum of $100,000.00;
- is fully refundable, without deductions; and
- in no way requires the prospective franchisee to enter into a franchise agreement.
Non Disclosure or Site Designation Agreement Exception - An exception exists that permits a prospective franchisee to enter into an agreement in relation to the franchise if, the agreement only contains terms that:
- require information/material provided to the prospective franchisee be kept confidential;
- prohibit the use of any information/material provided to a prospective franchisee; or
- designate a location, site or territory to a prospective franchisee.
Requiring the disclosure document be delivered 14 days in advance of payment and signing agreements, provides prospective franchisees an opportunity to undertake adequate due diligence and have sufficient time to consider the opportunity and make an informed decision regarding the franchising opportunity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.