If you are looking to grow your business and increase those revenues, you need to consider franchising! Toronto Business and Franchise Lawyer Sukhi Hansra explains the 5 key steps to franchising your business and how to get started today.
If you’re looking to expand your business and give yourself a bigger market to work with, franchising may be the way to go. Franchising is when you license your business model and trademarks to another party in exchange for a fee. In this Legal Guide, we’ll discuss the basics of franchising a business in Ontario. We’ll cover topics such as what franchising is, the benefits of franchising, and the process of franchising. If you’re thinking of franchising your business, or are just curious about what it entails, then this blog post is for you!
Franchising a business can be a great way to expand your company’s reach. It allows you to tap into new markets and grow your brand awareness. franchising can also be a less expensive way to expand than opening up new locations yourself. When you franchise, you are essentially partnering with another party who agrees to operate under your name and brand. This can be a great way to get your foot in the door of a new market without having to invest a lot of time and money into doing so.
How Do you Franchise a Business in Ontario?
The process of franchising a business in Ontario is not too different from franchising elsewhere in Canada. There are some specific things that you’ll need to do to get started, but the overall process is relatively straightforward:
- Register a Trademark for your Brand
- Develop a Solid Franchise Agreement
- Prepare your Franchise Disclosure Document
- Build your Franchise Manual
- Start Franchising Your Business!
Step 1: Register a Trademark For Your Brand
The first step is to register a trademark for your business. This is important because it will protect your brand and ensure that no one else can use it without your permission. To trademark your business, you’ll need to file a trademark application with the Canadian Intellectual Property Office (CIPO).
Trademark applications to CIPO can be done online, by mail, or in person. The application fee is $250 for one class of goods or services, or $400 for two classes. You can file for multiple trademark classes if you’d like, but it will cost extra.
You’ll need to include a few things with your application, such as:
- Your contact information
- The name and address of your business
- A description of your goods or services
- The trademark class(es) that you’re filing for
- A list of the countries where you plan to use the trademark
After you’ve filed your application, CIPO will review it to make sure that it meets all the requirements. If it does, they’ll publish it in the Trademarks Journal. This gives other businesses an opportunity to object to your trademark if they feel that it’s too similar to their own.
If there are no objections, CIPO will approve your trademark and you’ll be able to use it for 15 years. You can renew it after that for another 15 years.
Step 2: Develop Your Franchise Agreement
Once you have a registered trademark, you’ll need to create a franchising agreement. This is a legally binding contract between you (the franchisor) and the franchisee. The agreement will outline the terms of the franchising relationship, such as the duties of each party, the length of the contract, and any fees that need to be paid.
Franchise agreements can be long and complex because they are only way that the franchisor can protect its brand and reputation. It’s important to have a lawyer help you draft your franchising agreement. This will ensure that it’s legally sound and protect your interests.
The franchise agreement should cover topics such as:
- The payment of fees associated with the franchise
- The territory that will be covered by the franchise
- The franchisee’s obligations
- Restricted practices
- Termination clauses
- Renewal terms
- Dispute resolution procedures
- Training and support provided by the Franchisor
- Selling or transferring the franchised business
- and more…
This document is important because it ensures that both you and the franchisee are on the same page from the start. It also protects you from any legal issues that may arise down the road.
Step 3: Prepare Your Franchise Disclosure Document (FDD)
After you have developed your franchising agreement, you will need to prepare a Franchise Disclosure Document. In Ontario, this document is required under the Arthur Wishart Act (Franchise Disclosure), 2000. It must be provided to a prospective franchisee at least 14 days before they sign any franchising agreement or make any payment to you.
The FDD must disclose certain information about the franchisor, such as:
- The business experience of your franchisor and key personnel
- Any bankruptcies or insolvencies of your franchisor
- Any lawsuits that have been filed against your franchisor
- The terms of the franchising agreement, including the length of the franchise term and any renewal options
- All fees and payments associated with franchising, such as the initial franchise fee and ongoing royalties
- The territory that you’re franchising
- The franchisor’s obligations, such as training and support
- The franchisee’s obligations, such as site selection and build-out
- Financial statements of the franchisor
- and more…
What Happens if you Don't Provide an FDD?
The Arthur Wishart Act (Franchise Disclosure), 2000 requires franchisors to provide a prospective franchisee an FDD as follows:
- at least 14 days before signing the franchise agreement and taking payment for the franchise business.
- as one document, delivered at one time, and delivered in the proper way.
- that contains all “material facts”, financial statements, copies of all agreements proposed to be signed in connection with the franchise and any other information required by law.
If the franchisor fails to provide the franchisee with a valid FDD, the franchisee has a right to cancel the franchise agreement and request the following remedies:
- Refund to the franchisee any money received from the franchisee, at any point in time.
- Purchase all of the franchisee’s inventory that the franchisee purchased at the same price that the franchisee paid for the inventory.
- Purchase from the franchisee any supplies and equipment that the franchisee had purchased at the same price that the franchisee paid for the supplies and equipment.
- Compensate the franchisee for any losses that the franchisee incurred in acquiring, setting up and operating the franchise business.
If the franchisor does not pay these amounts within sixty days, the franchisee can initiate a lawsuit to recover these amounts.
Therefore, having a valid FDD and making sure that it is delivered to each franchisee in the right way is a very important step to franchising! This is one area where you will always want the help of an experienced franchise lawyer.
Step 4: Build Your Franchise Manual.
After you have prepared your FDD and Franchise Agreement, you will need to build a Franchise Manual. This document outlines how the franchisee should operate the franchised business on a day-to-day basis. It includes all of the important policies and procedures that the franchisee must follow, such as:
- The franchisor’s business model
- The franchisor’s marketing plan
- The franchisor’s accounting and bookkeeping procedures
- The franchisor’s inventory control procedures
- The franchisor’s employee training program
- The franchisor’s operating instructions
- The franchisor’s hiring and onboarding plans
- Standard workplace policies and procedures
- and more…
Franchise manuals are important because they ensure that each franchisee is operating the business in a consistent, relivable and predicable manner. This helps to protect the franchisor’s brand and reputation, and it also helps to ensure that each franchisee is successful. Relying on a proven system is the number one way to ensure satisfied paying customers!
Building a franchise manual can be a daunting task, but there are many resources available to help you. You can hire a franchising consultant or an experienced franchise lawyer to assist you in this process. There are also many franchising trade associations that offer educational resources and support.
Step 5: Start Franchising Your Business!
After you have prepared your franchising agreement and FDD, you are ready to start franchising your business! You can begin by marketing your franchised opportunity or by contacting franchise brokers to help you find good candidates. You can also start contacting potential franchisees and inviting them to learn more about your franchise opportunity. When meeting with potential franchisees, be sure to go over your FDD in great detail. This will help them understand the franchising process and what they can expect if they decide to franchise with you.
Frequently Asked Questions
Franchising is a business model that allows businesses to expand by selling the right to use their brand, name, and business model to franchised outlets. Franchising is a popular way to grow a business because it is less risky and less expensive than opening new locations.
In order to franchise your business in Ontario, you must first prepare a franchising disclosure document (FDD). This document must include information about the franchisor, the franchised business, and the franchisee. You must also have a franchising agreement that outlines the terms of the franchising relationship. Once you have these documents, you can begin contacting potential franchisees and inviting them to learn more about your franchise opportunity.
Franchising is a popular way to grow a business because it is less risky and less expensive than opening new locations. Franchising also allows businesses to expand their reach quickly and efficiently. When done correctly, franchising can be a very successful way to grow a business.
The biggest risk of franchising is that the franchisor may not have control over how the franchisee operates the franchised business. This can lead to problems if the franchisee is not following the franchisor's policies and procedures. It is important to carefully select franchisees who you feel will be successful in operating the franchised business.
Franchising may not be right for every business. Franchising is a popular way to grow a business, but it is not without risk. Before franchising your business, you should speak with a franchising consultant or lawyer to discuss whether franchising is right for your business.
In order to franchise your business in Ontario, you must first have a valid trademark for your brand and business. This is what you'll be licensing to your franchisees in exchange for a royalty fee. Next, you'll have to prepare a franchising disclosure document (FDD). This document must include information about the franchisor, the franchised business, and the franchisee. You must also have a franchising agreement that outlines the terms of the franchising relationship. Once you have these documents, you can begin contacting potential franchisees and inviting them to learn more about your franchise opportunity.
The cost of franchising your business in Ontario will vary depending on the size and scope of your franchised business. You will also need to pay for professional fees, such as franchising consultants or lawyers. Additionally, you will need to create marketing materials and a website for your franchise. The total cost of franchising your business can range from a few thousand dollars to tens of thousands of dollars.
The laws governing franchising in Ontario are the Arthur Wishart Act (Franchise Disclosure), 2002 and the Arthur Wishart Act Regulations. These laws set out the requirements for franchisors, franchisees, and franchised businesses. The regulations also include disclosure requirements that franchisors must follow.
Conclusion
If you are thinking about franchising your business in Ontario, there are a few things you should know. Franchising is a popular way to grow a business, but it is not without risk. You will need to prepare a franchising disclosure document and have a franchising agreement in place. Additionally, you should be aware of the franchising laws in Ontario. With careful planning and execution, franchising can be a successful way to grow your business. By following the franchising process and working with an experienced franchise lawyer, you can be sure that you are taking all of the necessary steps to protect your investment.
If you are thinking about franchising your business, contact us today to learn more about how we can help you build a customized growth strategy for your business. As experienced franchise lawyers, we can help you navigate the franchising process and protect your interests every step of the way.
