Franchise Disclosure Documents in Ontario: What You Need to Review

The Franchise Disclosure Document: Your Most Important Protection

Under Ontario's Arthur Wishart Act (Franchise Disclosure), 2000, every franchisor must provide prospective franchisees with a comprehensive disclosure document at least 14 days before any agreement is signed or money is paid. This document is your primary tool for evaluating the franchise opportunity and understanding your legal rights and obligations.

What Must Be in the Disclosure Document

A compliant Ontario franchise disclosure document must include:

• Business background of the franchisor and its principals (including any criminal convictions or bankruptcy history)
• Litigation history involving the franchise system
• Franchisee's initial investment and ongoing fee structure
• Territory rights and restrictions
• Training and support provided by the franchisor
• Restrictions on products and services the franchisee can offer
• Renewal, termination, and transfer provisions
• A complete list of current and former franchisees with contact information
• Audited financial statements of the franchisor
• A copy of all agreements the franchisee will be required to sign

Red Flags to Watch For

• Missing or incomplete audited financial statements
• High rate of franchisee turnover or a large number of former franchisees
• Broad termination rights for the franchisor without cause
• Inconsistencies between the disclosure document and the franchise agreement
• Unusually high ongoing royalties or marketing fees
• Litigation history suggesting systematic disputes with franchisees

Calling Current and Former Franchisees

The disclosure document contains contact information for current and former franchisees. Calling these franchisees directly — outside the presence of the franchisor — is one of the most valuable steps you can take. Ask them about their experience: Did the franchisor deliver on its promises? Was the financial performance consistent with the projections?

The 14-Day Cooling Off Period

You must receive the complete disclosure document at least 14 days before signing any agreement or paying any money. If the document is delivered late, or if it is materially deficient, your right to rescind the agreement (cancel with full refund) is triggered. Always note the date you receive the disclosure document.