Franchisor’s security interest (franchise PPSA)

Where a franchisor or its associate finances a franchisee, Ontario’s O. Reg. 581/00 requires the disclosure document to give the terms and conditions of the financing arrangements offered directly or indirectly. ServiceOntario’s Access Now page says registered information is available for searching by potential lenders and buyers. A PPSA search is how it is found.

How the Act treats it

Ontario’s PPSA defines a security interest as an interest in personal property that secures payment or performance of an obligation. Section 19 says a security interest is perfected when it has attached and all steps required for perfection are completed. Section 23 says registration perfects a security interest in any type of collateral, and s. 45(1) says a financing statement is registered to perfect by registration. Section 20(1) sets out who an unperfected security interest is subordinate to or not effective against, except as s. 20(3) provides. See also perfection of a security interest.

What to check or ask

• Whether a registry search shows a registration naming the franchisor or its associate
• What collateral the registration describes and which agreement it secures
• Whether the franchisor will discharge its registration on a sale
• How the financing terms appear in the disclosure document