Canada Franchise Disclosure Document by Megadox

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									DISCLOSURE DOCUMENT


         OF




    [FRANCHISOR]




       [date]
                                                                                    -2-


                                                                     Table of Contents

Requirements of the Alberta Franchises Act and the Arthur Wishart Act ...................................................... 4
Statements Mandated By The Arthur Wishart Act, 2000 .................................................................................... 6
   1.     Franchisor Information ..................................................................................................................................6
   Name ........................................................................................................................................................................7
   Current Position ......................................................................................................................................................7
   Prior Relevant Business Experience .....................................................................................................................7
   Time Engaged in Same Line of Business as Franchisor .....................................................................................7
   Principal Occupation ..............................................................................................................................................7
   Employer ..................................................................................................................................................................7
   2.     Previous Convictions and Pending Charges ...............................................................................................7
   3.     Civil Litigation and Liabilities.......................................................................................................................8
   4.     Administrative Proceedings and Existing Orders ......................................................................................8
   5.     Bankruptcy .......................................................................................................................................................8
   6.     A Statement Required by the Arthur Wishart Act, 2000. ............................................................................9
   7.     Nature of the Business ....................................................................................................................................9
   8.     Initial Franchise Fee and Other Fees ............................................................................................................9
   9.     Initial Investment Required ......................................................................................................................... 12
   10.      Financing ...................................................................................................................................................... 13
   11.      Working Capital .......................................................................................................................................... 13
   12.      Estimates of Annual Operating Costs for the Franchisee ...................................................................... 13
   13.      Restrictions on Sources of Products and Services and on What Franchisees May Sell ..................... 13
   15.      Training Programs or Other Assistance Offered to Franchisees by the Franchisor ........................... 14
   16.      Obligations to Participate in the Actual Operation of the Franchise Business ................................... 14
   17.      Government Licenses, Registrations and Authorizations ..................................................................... 15
   19.      Franchise Closure ........................................................................................................................................ 16
   20.      Earnings Claims .......................................................................................................................................... 16
   21.      Termination, Renewal and Transfer of the Franchise ............................................................................ 16
            A.      Term of Franchise ............................................................................................................................... 17
            B.     Right to Renew Franchise Agreement .............................................................................................. 17
            C.      Requirements For Franchisee to Renew .......................................................................................... 17
            D.      Events of Default and Termination .................................................................................................. 17
            E.     Post Termination Rights, Obligations and Covenants ................................................................... 18
            F.     Non-Competition Covenants ............................................................................................................. 19
   22.      Territory ....................................................................................................................................................... 19
   23.      Financial Statements ................................................................................................................................... 20
   24.      Other Material Facts ................................................................................................................................... 20
CERTIFICATE .......................................................................................................................................................... 20
Schedule “A” to a Disclosure Document of [Franchisor] Dated [date] ......................................................... 22
Schedule “B” to a Disclosure Document of [Franchisor] Dated [date] .......................................................... 23
                                                             -3-

Schedule “C” to a Disclosure Document of [Franchisor] Dated [date] .......................................................... 24
Schedule “D” to a Disclosure Document of [Franchisor] Dated [date] ......................................................... 25
                                                      -4-

                               DISCLOSURE DOCUMENT OF
                                           [FRANCHISOR]
                                                   [date]
A DISCLOSURE DOCUMENT MUST BE GIVEN TO A PROSPECTIVE FRANCHISEE NO LATER
THAN 14 DAYS PRIOR TO THE SIGNING OF THE FRANCHISE AGREEMENT OR THE
PAYMENT OF ANY CONSIDERATION BY THE PERSPECTIVE FRANCHISEE RELATING TO THE
FRANCHISE, WHICHEVER IS EARLIEST.

[Franchisor] (the “Franchisor”) is offering franchises and licenses in Canada for “[franchise]“ franchise
business. Being granted a Franchise in the “[FRANCHISE]“ system is subject to certain risks. The
Franchisor was only recently incorporated and has no record of earnings or working capital. There is no
assurance that the Franchisee will ever make a profit. There is no statement of estimated revenue, direct
costs or administration expenses published in connection with the trade of the franchise. There is no
assurance that municipal, provincial and federal requirements with which the Franchisee may have to
comply will be met or licenses, if any, be granted.

This document constitutes the Disclosure Document of the Franchisor as required by the provisions of
section 4 of the Franchises Act (Alberta) and of section 5 of the Arthur Wishart Act ( Ontario).

         Requirements of the Alberta Franchises Act and the Arthur Wishart Act

Sections 13 and 14 of the Franchises Act (Alberta) state:

        13       If a franchisor fails to give a prospective Franchisee the disclosure document by the time
                 referred to in section 4 [being at least 14 days before the signing by the prospective
                 Franchisee of any agreement relating to the franchise or the payment of any
                 consideration which is not fully refundable], the prospective Franchisee may rescind all
                 the franchise agreements by giving a notice of cancellation to the Franchisor or its
                 associate, as the case may be,

                 (a)     no later than 60 days after receiving the disclosure document, or

                  (b)    no later than 2 years after the Franchisee is granted the franchise, whichever
                         occurs first.

        14 (1)   A notice of cancellation given under section 13 operates

                 (a)     to cancel the franchise agreements, or

                 (b)     in the case of an agreement that is an offer to purchase, to withdraw the offer to
                         purchase.

             (2) The Franchisor or its associate, as the case may be, must, within 30 days of receiving a
                 notice of cancellation under section 13, compensate the Franchisee for any net losses that
                 the Franchisee has incurred in acquiring, setting up and operating the franchised
                 business.

Section 6 of the Arthur Wishart Act ( Ontario ) states:
                                                      -5-

        6 (1)    A Franchisee may rescind the franchise agreement, without penalty or obligation, no
                 later than 60 days after receiving the disclosure document, if the Franchisor failed to
                 provide the disclosure document or a statement of material change within the time
                 required by section 5 or if the contents of the disclosure document did not meet the
                 requirements of section 5.

           (2)   Franchisee may rescind the franchise agreement, without penalty or obligation, no later
                 than two years after entering into the franchise agreement if the Franchisor never
                 provided the disclosure document.

           (3)   The Franchisor, or Franchisor’s associate, as the case may be, shall, within 60 days of the
                 effective date of rescission,

                 (a)     refund to the Franchisee any money received from or on behalf of the Franchisee,
                         other than money for inventory, supplies or equipment;

                 (b)     purchase from the Franchisee any inventory that the Franchisee had purchased
                         pursuant to the franchise agreement and remaining at the effective date of
                         rescission, at a price equal to the purchase price paid by the Franchisee;

                 (c)     purchase from the Franchisee any supplies and equipment that the Franchisee
                         had purchased pursuant to the franchise agreement, at a price equal to the
                         purchase price paid by the Franchisee; and

                 (d)     compensate the Franchisee for any losses that the Franchisee incurred in
                         acquiring, setting up and operating the franchise, less the amounts set out in
                         clauses (a) to (c).

Section 7 of the Arthur Wishart Act ( Ontario ) states:

        7(1)     If a Franchisee suffers a loss because of a misrepresentation contained in the disclosure
                 document or in a statement of material change or as a result of the Franchisor’s failure to
                 comply in any way with section 5, the Franchisee has the right of action for damages
                 against,

                 (a)     the Franchisor;

                 (b)     the Franchisor’s agent, being a sales agent of the Franchisor who is engaged by
                         the Franchisor’s broker and who is directly involved in the granting of a
                         franchise;

                 (c)     the Franchisor’s broker, being a person other than the Franchisor, Franchisor’s
                         agent or Franchisee, who grants, markets or otherwise offers to grant a franchise,
                         or who arranges for the grant of a franchise;

                 (d)     the Franchisor’s associate; and

                 (e)     every person who signed the disclosure document or statement of material
                         change.

A Receipt of Disclosure Document is attached as Schedule “C”. Potential Franchisees and licensees
should, if they have not already done so, properly complete the Receipt of Disclosure Document and
return it to the Franchisor.
                                                     -6-

If a Franchisee or licensee suffers a loss because of a misrepresentation in this Disclosure Document then
the Franchisee or licensee has a right of action for damages against the Franchisor and every person who
has signed this Disclosure Document. If this Disclosure Document contains a misrepresentation, a
Franchisee or licensee who is granted a franchise or licensed business to which this Disclosure Document
relates is deemed by law to have relied on the misrepresentation unless the Franchisee or licensee was
granted the franchise or licensed business with knowledge of the misrepresentation.

In this Disclosure Document a person is an “associate” of the Franchisor if the person is directly involved
in the granting of the franchise or licensed business or if there are continuing financial obligations by the
Franchisee or the licensee to that person and significant operational controls by that person on the
Franchise and:

        (a)     the person controls the Franchisor;
        (b)     the person is controlled by the Franchisor; or
        (c)     the person and the Franchisor are under the common control of another person.

Statements Mandated By The Arthur Wishart Act, 2000

1.      A commercial credit report is a report, which may include information on the Franchisor’s
        business background, banking information, credit history and trade references. Such reports may
        be obtained from private credit reporting companies and may provide information useful in
        making an investment decision.

2.      Independent legal and financial advice in relation to the franchise agreement should be sought
        prior to entering into the franchise agreement.

3.      A prospective Franchisee is strongly encouraged to contact any current or previous Franchisees
        prior to entering into the franchise agreement.

4.      The cost of goods or services acquired under the franchise agreement may not correspond to the
        lowest cost of the goods and services available in the marketplace.

The information in this Disclosure Document is only a summary of more detailed information
appearing in the Franchise Agreement attached to and forming part of this Disclosure Document as
Schedule “A” (the “Franchise Agreement”) and other related agreements between the Franchisee and
the Franchisor and others. This Disclosure Document is not meant to be, nor is it, complete or all-
inclusive of all details of being a Franchisee or licensee of the Franchisor. Potential Franchisees and
licensees should carefully review the entire contents of this Disclosure Document and the Franchise
Agreement, and all other agreements referred to in this Disclosure Document with their accounting,
legal and other professional advisers regarding the grant of a franchise or a licensed business.

1.      Franchisor Information

(a)     The name and address of the Franchisor is:
        [name of Franchisor]
        [address]
        Tel:
        Fax:
        Website:

        [If the franchisor’s principal address is outside Ontario, the name and address of a person
        authorized to receive service in Ontario on the franchisor’s behalf.]

(b)     The names under which the Franchisor does or intends to do business are:
                                                      -7-

          [list all relevant business names]

(c)       The principal business address of the Franchisor is:
          as above [OR different address if appropriate]

(d)       The business form of the Franchisor is:

          The Franchisor is a [name of province] corporation, which was incorporated [date of
          incorporation] under the [name of legislation, e.g. Business Corporations Act ([province])].

(e)       [If the franchisor is a subsidiary, the name and principal address of the parent.]

(f)       The length of time the Franchisor has conducted a business of the type to be operated by the
          Franchisee is:

          The Franchisor, through [company] has been conducting the business of [type of business and
          services provided by business, period of time during which Franchisor has conducted such
          business]

(g)       The length of time the Franchisor has offered franchises for the same type of business as that to
          be operated by the Franchisee is:

          [set out length of time - if no previous experience: The Franchisor has not previously been
          involved in the business of franchising and licensing establishments for [Company] services,
          however Franchisor will commence franchising month/day/year.]

(h)       Details about whether the Franchisor has offered franchises in other lines of business are as
          follows:

          [give details e.g. the length of time the franchisor has offered the franchise to prospective
          franchisees; the number of franchises sold in the five years immediately preceding the date of the
          disclosure document.]

      (i) The directors, general partners and officers of the Franchisor and their principal occupations and
             employers during the 5 years preceding the date of this Disclosure Document, who will have
             day to day management responsibility relating to the franchise or licensed business are:



Name                Current            Prior Relevant       Time Engaged       Principal       Employer
                    Position           Business             in Same Line of    Occupation
                                       Experience           Business     as
                                                            Franchisor




2.        Previous Convictions and Pending Charges

(a)       Details detailing whether, during the ten years immediately preceding the date of the disclosure
                                                    -8-

        document, the Franchisor and its associates and any of the directors, general partners and officers
        of the Franchisor on convictions for the commission of indictable offences (or equivalent in other
        jurisdictions, including pleading no contest to any offence) involving franchises, licensed
        businesses or other businesses involving fraud, embezzlement, unfair or deceptive acts or
        practices and involving comparable violations and offences are as follows:

        None of the Franchisor or any of its associates or any of the directors, general partners and
        officers of the Franchisor who have management responsibilities relating to franchises or licensed
        businesses have been convicted for the commission of any indictable offences (or equivalent in
        other jurisdictions, including pleading no contest to any offence) involving franchises, licensed
        businesses or other businesses involving fraud, embezzlement, unfair or deceptive acts or
        practices or any comparable violations of offences. [except as follows:}

(b)     Details relating to the Franchisor and its associates and any of the directors, general partners and
        officers of the Franchisor on currently pending criminal proceedings involving franchises,
        licensed businesses or other businesses involving fraud, embezzlement, unfair or deceptive acts
        or practices and involving comparable violations and offences are as follows:

        None of the Franchisor or any of its associates or predecessors or any the directors, general
        partners and officers of the Franchisor who have management responsibilities relating to
        franchises or licensed businesses currently face pending criminal proceedings involving
        franchises or other businesses, involving fraud, embezzlement, unfair or deceptive acts or
        practices or involving comparable violations and offences. [except as follows:}

3.      Civil Litigation and Liabilities

Details relating to the Franchisor and its associates and any of the directors, general partners and officers
of the Franchisor on any finding of liability in a civil action or on any pending actions involving
franchises, licensed businesses or other businesses involving misrepresentation, unfair or deceptive acts
or practices and comparable actions are as follows:

        None of the Franchisor or any of its associates or any of the directors, general partners and
        officers of the Franchisor who have management responsibilities relating to franchises, licensed
        businesses or other businesses have been subject to any finding of liability in a civil action or on
        any pending actions involving franchises, licensed businesses or other businesses involving
        misrepresentation, unfair or deceptive acts or practices or comparable actions. [except as follows:}

4.      Administrative Proceedings and Existing Orders

Details relating to the Franchisor and its associates and any of the directors, general partners and officers
of the Franchisor on any currently effective injunctive or restrictive orders imposed by, or any pending
administrative actions to be heard before, any public agency involving franchises, licensed businesses or
other businesses are as follows:

        None of the Franchisor or any of its associates or any of the directors, general partners and
        officers of the Franchisor who have management responsibilities relating to franchises, licensed
        businesses or other businesses are subject to any currently effective injunctive or restrictive
        orders imposed by, or any pending administrative actions to be heard before, any public agency
        involving franchises, licensed businesses or other businesses. [except as follows:}

5.      Bankruptcy

Details of any bankruptcy or insolvency proceedings (voluntary or otherwise) in the last six years against
the Franchisor and its associates against a company whose directors or officers are currently directors,
                                                    -9-

general partners and officers of the Franchisor and against a partnership whose general partners are
currently directors, general partners and officers of the Franchisor are as follows:

        None of the Franchisor or any of its associates or any of the directors, general partners and
        officers of the Franchisor who have management responsibilities relating to franchises or licensed
        businesses have in the last six years declared or made any proposal or assignment into
        bankruptcy or have been subject to insolvency proceedings (voluntary or otherwise). [except as
        follows:}

6.      A Statement Required by the Arthur Wishart Act, 2000.

No formal mediation or other alternative dispute resolution process is used by the Franchisor.

Mediation is a voluntary process to resolve disputes with the assistance of an independent third party.
Any party may propose mediation or other dispute resolution process in regard to a dispute under the
franchise agreement, and the process may be used to resolve the dispute if agreed to by all parties.

7.      Nature of the Business

The Franchisor’s business and the franchises or licensed businesses to be offered in Canada are as follows:

        Franchisor is in the business of owning and licensing others to operate businesses. The Franchisor
        believes it has developed a distinctive, unique and sound business format to meet the needs of
        the market for [details of market being served and services provided].

        The target market for a franchise is the market related to: [description of target market].

8.      Initial Franchise Fee and Other Fees

(a)     The initial franchise or license fee and the conditions when such fees are refundable is as follows:

        The initial franchise or license fee payable for the license is $____________ plus applicable taxes.
        Each perspective Franchisee will pay to the Franchisor, a deposit in the sum of $____________,
        which will be refundable until such time as the statutory review period set forth on page 1 of this
        Disclosure Document has expired. The balance will be payable on execution of the Franchise
        Agreement.

        This deposit is payable in all jurisdictions except Ontario where the Arthur Wishart Act
        specifically prohibits a deposit or other contract being entered into until the perspective
        Franchisee has been provided with a disclosure document and the 14 day review period has
        expired.

(b)     Details about other recurring or isolated fees or payments that a Franchisee or licensee must pay
        to the Franchisor or its associates or that the Franchisor or its associates impose or collect in
        whole or in part on behalf of a third party, including the refundability of such fee and the
        conditions when each fee or payment is refundable, are as follows:

        (i)     Royalties:

                The royalty for [company] licensed business is ________% (plus applicable taxes) of
                “Gross Revenues”. “Gross Revenues” is defined in the Franchise Agreement and shall
                mean and include the actual gross charges for all gross revenues derived from services
                provided from and/or through [franchisor] location and other products or services that
                [Franchisor] may introduce from time to time less any goods, or services or other taxes
                imposed by any federal, provincial, state or municipal authority. There are no other
                                                  - 10 -

        royalties required to be paid by a Franchisee or a licensee to the Franchisor or to any
        third parties.

(ii)    Interest:

        Interest is charged on unpaid amounts payable to the Franchisor at a rate of [interest
        rate]% per month or [annual interest rate]% per annum.

(iii)   Marketing Programs:

        Franchisee must participate in [FRANCHISOR] national advertising and marketing
        promotions. There is a fee required for a national advertising fund and promotional
        programs fund of ___% of the preceding week’s Gross Revenues plus applicable taxes.
        Additional information on the advertising fund may be found in Article _____ of the
        Franchise Agreement. A Franchisee must spend a minimum of ___% of its annual Gross
        Revenues on local advertising of its [franchise] Business, in addition to the contribution
        to the National Advertising Fund. All advertising, in-store marketing and promotional
        material must receive prior written approval from [Franchisor]

        A.          The percentage of the advertising fund that has been spent on national
                    campaigns and local advertising in the previous two fiscal years.

                    [details]

        B.          The percentage of the advertising funds, other than the percentage described in
                    sub-subparagraph i., that has been retained by the Franchisor, the Franchisor’s
                    parent or the Franchisor’s associate in the previous two years.

                    [details]

        C.          The projected amount of the contribution by the Franchisee to the advertising
                    fund.

                    The amount if any, which a Franchisee shall contribute, is disclosed in Section
                    8b(iii) above.

                    1.          the projected percentage of the fund to be spent on national and local
                                advertising campaigns for the current fiscal year.

                                [details]

                    2.          the projected percentage of the fund to be retained by the Franchisor, the
                                Franchisor’s parent or the Franchisor’s associate in the current fiscal
                                year.

                                [details]

                    3.          Reports on advertising activities financed by the             advertising
                                contributions will be made available to the Franchisees.

                                The Franchisor will provide a complete accounting of any expenditure
                                from the advertising fund.

(iv)    Expenses:
                                                 - 11 -

               Franchisee will be responsible for the travel, living and other direct expenses (including
               salaries) incurred by its attendees who attend the training course.

      (v)      Confidential Operations Manual:

               Franchisees are loaned a copy of the Franchisor’s Confidential Operations Manual.

      (vi)     Audit:

               Expenses incurred by the Franchisor in conducting an audit of the Franchisee’s or
               licensee’s books and records of account are payable by a Franchisee or licensee if the
               audit reveals a deficiency of 3% or more in the amount of any fee, royalty, advertising
               contribution or other amount payable by the Franchisee or licensee to the Franchisor.

      (vii)    Insurance:

               Franchisee will be obliged to pay insurers for premiums payable in connection with
               comprehensive liability insurance (including products liability and complete operations
               coverage). Franchisee must also indemnify Franchisor and its affiliates and employees,
               officers, directors and shareholders against all losses and expenses (including reasonable
               legal fees) incurred by any of them owing to claims that arise directly or indirectly from
               Franchisee’s operations.

      (viii)   Renewal Fees:

               Franchisee must pay all reasonable legal and administrative fees associated with the
               renewal of the Franchise Agreement.

      (ix)     Indemnity:

               Legal fees, costs and other expenses incurred by the Franchisor in the investigation,
               defense or prosecution of any and all claims arising out of the Franchisee’s operation of
               [franchise] Business are payable by the Franchisee.

               The initial franchise fee described in Section 5.1 is, save and except the sum of $______
               which is retained by the Franchisor, fully refundable in the event Franchisee or its
               approved designated manager fails to complete the initial training course to the
               satisfaction of Franchisor or in the event an approved location is not secured (and the
               lease or sub-lease approved) within 90 days of the date of execution of the Franchise
               Agreement. Except as noted above none of the foregoing fees, charges, costs or expenses
               are refundable under any circumstances.

(c)   Obligations in the franchise agreement to purchase or lease from the Franchisor, the Franchisor’s
      associate or suppliers approved by the Franchisor or the Franchisor’s associate.

      [Pursuant to Section ______ of the Franchise Agreement, the Franchisee will most likely be
      required to purchase the “turn key” store location from the Franchisor, or its designated
      contractor(s), the costs for which are estimated in Section 4 of the Disclosure Document.

      The Franchisee agrees to use in the operation of the Franchise Business only those brands or
      types of fixtures, cash registers, point of sales systems, equipment, and signs that the Franchisor
      has approved, in its sole discretion, as meeting its specifications and
								
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