What should I check about renewal terms when buying a resale franchise?

The renewal clause decides how long you can count on the location. A short remaining term with an uncertain renewal can change what you are really buying. Ask for the agreement itself and read the renewal clause, not a summary from the seller. Then ask the franchisor to confirm the position in writing.

Remaining term and who can renew

Find the date the term ends, any renewal periods already used, and whether the franchisee or the franchisor holds the option. Check that the renewal right passes to a buyer on a transfer, or whether the franchisor may offer you something different at the end of the current term. Our page on what happens when a franchise agreement expires covers the end of term in more detail.

The agreement and fees at renewal

Ask whether renewal means extending the current agreement or signing the franchisor’s current form, which may have different terms. Ask what renewal conditions apply, such as renovations, training or fees, and whether any are described as a renewal fee or extension fee. Request the current form of agreement now, so you can see whether it changes anything you are pricing in.

How the law treats renewals

Ontario’s Arthur Wishart Act applies to a renewal or extension of a franchise agreement where the business is operated or to be operated partly or wholly in Ontario. Its disclosure section does not apply to a renewal or extension where there has been no interruption in the operation of the business and no material change since the agreement or latest renewal or extension was entered into. If either condition is not met, that exemption is unavailable, and in any proceeding under the Act the party claiming an exemption bears the burden of proving it. Saskatchewan’s Franchise Disclosure Act has a comparable exemption, and the Canadian Franchise Association notes that important differences exist between provinces.

• The date the current term ends and any renewal periods already used
• Whether the renewal right transfers to you on the sale
• Whether renewal is on the current agreement or the franchisor’s current form
• Renewal conditions and any renewal or extension fees
• Written confirmation from the franchisor of all of the above