Master franchise

A master franchise sits one level above an ordinary franchise: its holder, the subfranchisor, can grant franchises to others on its own account. The term matters if a buyer is offered the right to grant franchises rather than to run a single location. How do I buy a franchise in Canada? covers the wider buying process.

How the Acts treat it

Ontario’s Arthur Wishart Act states that a franchise includes a master franchise and a subfranchise, and British Columbia’s and Manitoba’s Franchises Acts say the same. The Ontario Act treats a subfranchisor as a franchisor toward its subfranchisee and as a franchisee toward the franchisor. Alberta’s Franchises Act words its definition as the right to sell or offer franchises for the subfranchisor’s own account. Where a franchisee grants a franchise, the exemption from disclosure in Ontario’s section 5(7)(a) applies if all its conditions are met, which include, for a master franchise, that the entire franchise is granted.

What to check

• What the master agreement lets the holder grant, and where
• What the franchisor must approve before a subfranchise is granted
• Whether the subfranchise agreements already signed are in order