Can I own a franchise through a corporation?

Holding a franchise in a corporation is standard practice and sensible for tax and liability reasons. It is worth being clear-eyed about how much liability protection it actually delivers in a franchise context, because the answer is less than in an ordinary business.

The personal guarantee is the point to negotiate

Franchisors require guarantees because they are granting a long-term licence to a company that may have no assets beyond the location. The guarantee typically covers royalties, the lease where the franchisor is involved, and damages on default. Its scope and duration are occasionally negotiable; its existence rarely is.

Approval attaches to people, not to the company

The franchisor approves named individuals as operators. That is why a later change in who controls the corporation triggers the transfer provisions even though the franchisee entity has not changed — the people the franchisor approved are no longer the people running it.

What the structure does still give you

Real benefits remain. A corporation can hold the lease and supplier contracts, allows a share sale as an exit route, provides planning room for income splitting and the lifetime capital gains exemption where the tests are met, and contains liabilities a guarantee does not reach — employment claims and third-party claims among them.

One corporation per location, or one for several

Multi-unit operators often hold each location in its own company so that trouble at one does not reach the others, with a holding company above. Franchisors may require a specific structure, and the guarantees requested usually follow it. Decide this with an accountant before incorporating rather than reorganising afterwards.