Restrictions on sources of products and services (franchise disclosure item)

A franchisee reads this item to learn where required goods and services must come from. Ontario’s O. Reg. 581/00 asks for a description of any restrictions or requirements imposed by the franchise agreement with respect to obligations to purchase or lease from the franchisor, the franchisor’s associate or suppliers approved by either. Alberta’s Franchises Regulation has an item with the same heading and asks for obligations to purchase or lease from the franchisor or its associates, from suppliers they approve, or under their specifications. The franchisor’s disclosure duties are wider than this one item.

What else the item reaches

Both items also cover what the franchisee may sell and to whom. Ontario asks for a description of the goods and services the franchisee may sell and the persons to whom they may be sold. Alberta asks for restrictions on the goods or services the franchisee may sell and any that limit the customers. A separate item deals with rebates; see franchise supply chain rebate. This entry covers Ontario and Alberta only; check the rules where you are.

What to check or ask

• Which goods and services must come from the franchisor, its associate or an approved supplier
• Whether the franchisor can change the approved-supplier list, and how
• Whether the franchise agreement and the disclosure document describe the restrictions the same way
• What the agreement says about goods or customers the franchisee may not serve