Can I back out if the franchisor’s conditions are too strict?

Whether you can leave depends on what you have already signed. If franchisor conditions arrive after the offer is accepted, the purchase agreement is where your options are set. Ontario’s and Saskatchewan’s franchise statutes include a right to rescind, but in Ontario it turns on disclosure failures. Before you decide to walk, read the agreement and take advice on the deposit.

Start with your purchase agreement

Look for a condition that makes the deal depend on franchisor approval, and check whether it says the approval must be on terms acceptable to you. Check the deadline for waiving or satisfying conditions, what happens to the deposit if a condition fails, and whether you can end the agreement or only extend it. If conditions are open, tell the seller promptly and in writing. Waiving a condition can remove your way out.

What the statute can add

Under Ontario’s Arthur Wishart Act, a franchisee may rescind without penalty or obligation no later than 60 days after receiving the disclosure document if the franchisor failed to provide it, or a statement of material change, within the required time, or if its contents did not meet the requirements. If the franchisor never provided a disclosure document, the franchisee may rescind no later than two years after entering into the agreement. Strict approval conditions are not among those grounds.

Why a resale may fall outside it

The disclosure section does not apply to a grant by a franchisee if the Act’s conditions are met, including that the grant is not effected by or through the franchisor. In any proceeding under the Act, the burden of proving an exemption is on the person claiming it. Saskatchewan’s Franchise Disclosure Act has its own rescission provisions, and other provinces differ. See our page on whether rescission rights apply to a franchise resale.

The Act also imposes a duty of fair dealing on each party to a franchise agreement in its performance and enforcement. Ask a lawyer whether it helps at your stage, since you may not yet be a party to the agreement.