- The franchisor must give you a disclosure document at least 14 days before you sign the franchise agreement or any related agreement, or pay any money.
- The government does not review or approve franchisors or their disclosure documents, so the checking is up to you and your advisers.
- If disclosure is late, deficient or never given, Ontario law gives you rights to cancel, but the deadlines are firm.
A pizza franchise can look like a safe way into business ownership. You get a known name, a menu and a system. But you are still signing a long contract and usually spending a lot of money, often before you have sold a single pie.
Ontario has a specific law for franchise purchases, the Arthur Wishart Act (Franchise Disclosure), 2000. This article walks through the legal steps in the order most buyers meet them, and explains what the Act does and does not do for you.
Why franchise buying has its own rules
Buyers often have much less information than the franchisor, who wrote the contract and knows how other locations have performed. The Act tries to level that out by requiring the franchisor to hand over key information before you commit.
It is important to know what the Act does not do. The government does not review or approve franchisors or their disclosure documents. A document being handed to you does not mean anyone has checked that the business is sound.
Step one: receive the disclosure document
The franchisor must give you its disclosure document at least 14 days before you sign the franchise agreement or any related agreement, or pay any consideration. Consideration means money or something of value, so a deposit counts as a trigger for the clock.
The document must cover the franchisor's background, litigation and bankruptcy history, financial statements, offering costs, draft agreements, and information about current and former franchisees. The information must be accurate, clear and concise.
The franchisor must also disclose any material change before you sign or pay. A material change is one that could reasonably be expected to have a significant negative effect on the value or price of the franchise or on your decision to buy.
Step two: read it all and test it
Use the 14 days well. Do not treat them as a waiting period. Read the disclosure document and the draft agreements side by side, and look for gaps or things that do not match what you were told in the sales conversations.
- Does the disclosure document include financial statements, litigation and bankruptcy history, and a list of current and former franchisees?
- Do the costs listed match what you have been told you will need to open?
- Is the document signed and dated with the required certificate? A missing certificate has been treated as a serious defect.
- Have you phoned former franchisees, not only current ones, and asked why they left?
- Do you understand the term, renewal, territory, supplier and transfer rules in the draft agreement?
- Have you seen the proposed premises lease and any document that would make you personally responsible for the franchise's debts?
Fees, royalties and similar charges are set by the contract and disclosed to you, so read those clauses closely and ask what they would mean in a slow first year.
Step three: get advice before you sign or pay
A lawyer can review the agreement, explain what each clause means for you, and spot terms that are unusual. An accountant can test the financial figures against a realistic budget. Doing this before you sign is far easier than trying to fix problems afterwards.
Be careful about paying a deposit or signing any form, even one described as a simple letter of intent, until you have had advice. Under the Act, paying consideration or signing any related agreement is tied to the 14-day rule.
What the Arthur Wishart Act protects once you are in
| Protection | What it means |
|---|---|
| Rescission for late or deficient disclosure | You can cancel without penalty within 60 days of receiving the disclosure document or material change statement if it was late or deficient. |
| Rescission if nothing was given | If no disclosure document was ever provided, you can rescind within two years of entering the franchise agreement. |
| Fair dealing | Every party to a franchise agreement must act in good faith, and a breach lets the other party sue. |
| Right to associate | Franchisees can associate with each other despite any contract term, and may sue for damages if the franchisor interferes. |
After a valid rescission the franchisor has 60 days to return your money, and you can also sue for damages for loss from incomplete information or misrepresentation.
What to do next
- Ask the franchisor in writing for the disclosure document and note the date you receive it.
- Do not sign anything or pay anything until you have had at least 14 days with the complete package.
- Book a lawyer and an accountant to review the documents together.
- Keep every email, brochure and note of what was promised to you.
- If anything seems missing or late, get advice quickly because the cancellation deadlines run from specific dates.
Frequently asked questions
How long do I have to review a franchise disclosure document in Ontario?
The franchisor must give it to you at least 14 days before you sign the franchise agreement or any related agreement, or pay any consideration. You can take longer if you need it. Use the time to have a lawyer and accountant review it.
Does the government check a franchisor before I buy?
No. The government does not review or approve franchisors or their disclosure documents. That is why independent advice before you sign matters.
What if the franchisor changes something after I get the document?
The franchisor must disclose any material change before you sign or pay. A material change is one that could reasonably be expected to significantly hurt the franchise's value or price, or your decision to buy.
Can I cancel if I change my mind after signing?
The Act's cancellation rights are tied to disclosure problems. They apply where disclosure was late, deficient or never given. Whether you have a right to cancel for other reasons depends on your contract and the facts, so ask a lawyer.
Sources
- Ontario.ca – Franchising information for buyers and owners — ontario.ca
- Court of Appeal for Ontario, 2483038 Ontario Inc. v. 2082100 Ontario Inc., 2022 ONCA 453 — ontariocourts.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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