Renewal fee

A renewal extends or renews an existing franchise agreement, so check that agreement for any charge for renewing. The issue matters to a buyer asking how long the franchise can continue. What should I check about renewal terms when buying a resale franchise? goes into the details.

How the Acts treat renewals

British Columbia’s Franchises Act refers to a non-refundable initial franchise fee, renewal fee or extension fee in one of the exemptions in section 5(8). Both that Act (section 5(8)(f)) and Ontario’s Arthur Wishart Act (section 5(7)(f)) exempt certain renewals or extensions from disclosure where the business ran without interruption and there has been no material change. Those exemptions have conditions, so read the section. Under Ontario’s regulation, the disclosure document must describe all restrictions or conditions in the agreement related to its termination or renewal.

What to ask

• How much of the term remains, and whether renewal is a right or needs the franchisor’s agreement
• Whether a fee is charged on renewal and how it is set
• Whether renewal means signing a new agreement on current terms