Prescribed fees and payments (franchise disclosure)

A franchise buyer meets this term when totalling the cost of the deal from the disclosure document rather than from the sales pitch. In Ontario’s Arthur Wishart Act, “prescribed” means prescribed by regulations made under the Act.

Ontario

Ontario’s s. 6 requires a list of the franchisee’s costs of establishing the franchise: deposits and franchise fees, whether they are refundable and on what conditions, estimates for inventory, leasehold improvements and equipment, and any other payment to the franchisor, direct or indirect, required by the franchise agreement, with its nature, amount and due date. If the franchisee must contribute to an advertising fund, the document must describe how the fund has been spent and retained, and it must state whether the franchisor or its associate receives a rebate, commission, payment or other benefit from franchisees’ purchases and, if so, whether it is shared with franchisees.

Alberta

Alberta’s Schedule 1, item 7, asks for the initial franchise fee and the conditions when it is refundable, plus other recurring or isolated fees or payments the franchisee must pay to the franchisor or its associates, or that they impose or collect, in whole or in part, on behalf of a third party, with the conditions under which any of them is refundable.

What to ask

• Whether every charge in the agreement appears in the itemized list
• Which payments are refundable, and on what conditions

This entry covers Ontario and Alberta only; check the rules where you are. See costs and fees in buying a franchise and franchise fee.