Do I need a franchise broker to buy a franchise?

A buyer comparing franchises may be put in touch with a franchise sales broker. The franchise statutes in Ontario and British Columbia treat that person in a specific way. Neither statute says whether you should hire help; both set out who must give you a disclosure document. This page covers only those two provinces, so check the law of the province where the franchise will operate.

What the Acts call a franchisor’s broker

Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 describes the franchisor’s broker as a person, other than the franchisor, its associate or agent, or a franchisee, who grants, markets or otherwise offers to grant a franchise, or who arranges for the grant of a franchise. British Columbia’s Franchises Act defines the term in similar words, without the reference to an agent. Ontario’s definition of a prospective franchisee includes a person whom a franchisor’s broker invites to enter into a franchise agreement, and BC’s definition also refers to the franchisor’s broker. In both Acts, a franchisee who suffers a loss because of a misrepresentation in the disclosure document or the franchisor’s failure to comply with section 5 has a right of action for damages against the franchisor’s broker as well as the franchisor, subject to the defences the Acts set out.

Who owes you the disclosure document

The Ontario Act says the franchisor shall provide a prospective franchisee with a disclosure document, received not less than 14 days before the earlier of signing the franchise agreement or any other agreement relating to the franchise and paying consideration (excluding certain deposits), subject to exceptions in section 5. BC’s Act sets out a 14-day window in its own terms, subject to the exceptions in its section 5. Both Acts place the duty to provide the document on the franchisor.

Other routes to information and advice

The Canadian Franchise Association’s LookForaFranchise.ca directory says its information requests let prospective franchisees ask a franchise brand for additional information directly. The Association also says thorough due diligence should be done with franchise professionals, including a franchise lawyer, accountant and banker. When a broker is involved, ask who pays them and whether they are acting for the brand, and ask any adviser whom they act for.

Once you have a disclosure document, what to check in the franchise agreement is a sensible next read.