Business format franchise

The Canadian Franchise Association describes franchising as giving the franchisee the right to use the owner’s operating system, name, trademarked materials, products and marketing techniques. A business format franchise is that full-system kind. Buyers weighing it against other routes can start at should I buy a franchise or an independent business.

Two limbs in the statutes

Ontario’s Arthur Wishart Act defines a franchise in two ways, and British Columbia’s Franchises Act follows the same structure. Both need required payments to the franchisor or its associate. The first adds sales substantially associated with a trademark, trade name or logo, and significant control over, or significant assistance with, the franchisee’s method of operation. That description fits a brand-plus-system franchise. The second covers representational or distribution rights for goods or services supplied by the franchisor or a designated supplier, together with location assistance, whether or not a trademark is involved. Both Acts also list relationships they do not apply to, such as employment and partnership (s. 2(3) in each).

What to check or ask

• Which parts of the operation the franchisor controls or supports under the agreement
• Who owns the brand, and the licence to use the trademark
• Whether a province’s franchise Act applies to the deal as structured