Can a buyer use a different name than the franchise brand?

In a brand-based franchise, the brand is not the franchisee’s. Under one branch of the definition in Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000, the franchisor grants the right to sell goods or services substantially associated with a trade-mark, trade name, logo or other commercial symbol owned by or licensed to the franchisor or its associate, and has the right to exercise or exercises significant control over, or has the right to provide or provides significant assistance in, the franchisee’s method of operation. The definition also requires payments to the franchisor or its associate, and a second branch covers distribution rights whether or not a trade-mark is involved. A resale buyer steps into the existing arrangement, so whether you could swap the brand name for your own while staying in the system is a question for the agreement and the franchisor.

What the franchise agreement controls

Which name you may use, and where, is a term of the agreement you take over or sign with the franchisor. Read the clauses on signage, advertising, use of the trade name and trade-mark, and what you must do when the agreement ends. Where the Act’s disclosure rules apply to your purchase, the disclosure document must include copies of all proposed franchise agreements and other agreements relating to the franchise that you will sign. If the rules do not apply, ask the franchisor for the same documents.

Leaving the brand is a different transaction

Check what the agreement lets a seller pass on without the franchisor’s approval. Running the location under your own name, outside the system, would mean the franchise relationship ends or is never taken on, and the agreement may carry restrictions that follow you out. Ask a lawyer to read the termination and post-term clauses before you assume a rebrand is available. The Canadian Franchise Association notes that several provinces regulate franchising and that important differences exist between them.

Registering the name you will trade under

Whichever name you choose, check the registration rules. Under Ontario’s Business Names Act, a corporation may not carry on business or identify itself to the public under a name other than its corporate name unless that corporation has registered the name, and an individual may not use a name other than their own unless they have registered it. Outside Ontario, confirm the registry and rules in the province where the business operates. Our page on registering a business name after an asset purchase walks through that step.