Understanding Franchise Disclosure Documents
The franchise disclosure documents are very important to understand when you are buying a franchise in Canada. The Franchise Act in Alberta and Franchise Regulations require that there is a certain amount of disclosure when it comes to these documents. The documents need to contain certain elements when provided to potential franchisees, as well as those who are already franchisees and who are looking to renew. People selling a franchise should provide them to potential buyers. The franchise disclosure document lawyers at Kahane Law Office in Calgary, Alberta understand franchise law. Call today 403-225-8810.
What Is In A Franchise Disclosure Document
A franchise disclosure document is required to include certain elements to provide the franchisee with information they will use to decide whether they want to move forward or not. The mandatory information includes:
- corporate name of the franchisor;
- business experience of the franchisor;
- directors (as well as general partners and officers);
- franchise experience;
- nature of the business;
- existing franchises (including location and contact information);
- corporate outlets;
- investment requirement;
- franchise documents;
- earnings claims;
- opportunity to review and investigate (not less than 14 days);
- bankruptcy and insolvency;
- existing litigation;
- other material information; and lastly
- certificate of disclosure.
The reason all of these items need to be available for the franchisee is so they can make a decision on buying into the business. If a company doesn’t provide the franchise disclosure document, then the franchisee will not know whether he or she should move forward. They do not have all the vital information they need to make a good decision. Failing to provide a all the documentation in a timely manner often leads to persecution,loss of a franchisee and a lawsuit.
Franchise Disclosure Documents: For Franchisees & Franchisor!
This legally required documentation are key to both a franchisee and franchisor. They offer protection to both for differing reasons. Ultimately, the law requires franchisor to pass on accurate information so that the franchisee makes an informed choice. For example, the following outlines why this is important.
Why Important For Franchise Owner
The importance of a franchise disclosure document, admittedly, all stems from the law and the corresponding legal requirements to provide them to investors and operators. It is an absolute requirement for anyone who owns a franchise to provide this documentation before binding someone to the business contractually. Not providing a full set of these key documents often leads to fines, penalties, loss of franchisee income, the loss of a franchisee, etc. It is important to talk to your franchise disclosure document lawyer about the risk of trying to “get around” franchise laws.
Why Franchise Disclosure Documents Are Important For Franchisor
The greatest risk to the franchisee is not getting what they think they are getting when buying into a franchise. See below for some of the issues that can come up when important information is not disclosed.
The Risks Of Not Reviewing A Franchise Disclosure Document
Imagine that you are looking into a franchise that you really like. In fact, you like it so much that you don’t bother to look at the franchise disclosure document closely. You might not know that the company is currently being sued by another party.You might not know that several locations in Canada have closed down, or that they don’t have any other experience with franchisees – you are the first. Naturally, some of those things would make you reconsider working with them. You might deem it to be too risky, and something that you would much rather avoid for your own financial security.
The more you know about a business the better your ability to make a good decision. This is certainly true with franchises. A thorough review of this documentation is key. You don’t want to buy into a franchise that doesn’t have a future or has many competing locations near you. Imagine being someone buying into a horse and buggy franchise during the rise of the automobile! Do your research, starting with a franchise disclosure document, will help immensely.
How Do Lawyers Help?
Many times, the franchise disclosure document, along with all of the other paperwork necessary in buying into a franchise, can be quite difficult to understand. There can be phrases, terms, and “lawyer talk” that is confusing. Instead of trying to understand everything on your own, you should make sure you are working with an lawyer whom has experience in the field of franchises. They can help to make your life much easier, and you can be more secure in the decisions you ultimately make. You can also find more information in the Canadian Franchise Association website.
Finding a Franchise Document Review Lawyer In Calgary, Alberta
The franchise lawyers at Kahane Law Office in Calgary, Alberta can help with your franchise legal needs. We can be reached toll-free at 1-877-225-8817 (or 403-225-8810 locally in Calgary, Alberta), or email us directly here.