Initial inventory and equipment package

The phrase is not defined in the Ontario or Alberta disclosure rules, so check what a franchise agreement or disclosure document includes in it, and what a buyer of a franchise unit must still buy, replace or upgrade.

What the disclosure rules say

Where Ontario’s Arthur Wishart Act requires disclosure (subject to its s.5(7) exemptions, including some grants by a franchisee), O. Reg. 581/00 requires a list of the franchisee’s costs of establishing the franchise, including an estimate of the costs for inventory, leasehold improvements, equipment and other property necessary to establish it, explaining any assumptions. It also requires a description of restrictions or requirements on obligations to purchase or lease from the franchisor, its associate or approved suppliers. Alberta’s Franchises Regulation lists, among the contents of a disclosure document, details of the initial investment required to start operations and the franchisee’s obligations to buy or lease from the franchisor, its associates or approved suppliers, or to the franchisor’s specifications.

What to ask

• What the estimate includes, and which assumptions sit behind it
• Which items must come from the franchisor or an approved supplier
• Which items on site belong to the seller and which to the franchisor