Estimated initial investment (franchise disclosure)

A buyer budgeting for a new unit meets this in the disclosure document. The answer on what a franchisor must disclose places it among the other contents.

What Ontario requires

Section 6 of O. Reg. 581/00, made for s. 5(4)(a) of the Arthur Wishart Act, requires a list of the franchisee’s costs of establishing the franchise: deposits and franchise fees, whether they are refundable and on what conditions, an estimate of costs for inventory, leasehold improvements, equipment, leases, rentals and other property needed, with the assumptions behind it, and other costs including payments to the franchisor. If an estimate of annual operating costs is given, the document must state its basis, its assumptions and where supporting information can be inspected.

Alberta, and what to ask

Schedule 1, item 8, of Alberta’s Franchises Regulation requires details of the initial investment required to start business operations. This entry covers Ontario and Alberta; check the rules where you are.

• What each estimate assumes, and where the support can be inspected
• What is left out of the list
• Which fees are refundable, and on what conditions