Can a buyer negotiate a lower fee if they are an existing franchisee?

Nothing in Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 gives an existing franchisee a discount on a transfer fee. Look to the franchise agreement for the fee; any reduction is a concession you negotiate with the franchisor. Whatever leverage you have as an existing franchisee is a matter for negotiation, not a legal entitlement. The questions below help you tell the two apart.

Where the fee comes from

Read the transfer clause in the franchise agreement for the amount, what it is said to cover, and when it is payable. The Act refers to a transfer fee in this way: a grant is not effected by or through the franchisor merely because a transfer fee must be paid to the franchisor in an amount set out in the franchise agreement, or in an amount that does not exceed the reasonable actual costs incurred by the franchisor to process the grant. That wording sits in the disclosure exemptions. It does not set a fee or entitle you to a cut.

What existing-franchisee status does change

It can affect disclosure. The Act’s disclosure section does not apply to the grant of an additional franchise to an existing franchisee if the additional franchise is substantially the same as the existing one and there has been no material change since the existing agreement or its latest renewal or extension. Saskatchewan’s Franchise Disclosure Act has a comparable exemption, and other provinces run their own regimes. In any proceeding under the Ontario Act, whoever claims an exemption bears the burden of proving it, so ask the franchisor which one it is relying on.

What to ask for

• The fee amount and whether it differs for a buyer who already holds a franchise in the system
• What the fee covers, such as legal review, training or a new agreement
• Whether training or other fees apply to you again as an existing franchisee
• Any change in the fee, or any other concession, confirmed in writing before you sign

The Act also imposes a duty of fair dealing on each party to a franchise agreement in its performance and enforcement. That section says nothing about fees or discounts, so treat the conversation as a negotiation. Our page on what a franchise transfer fee is covers the basics.