Franchising plays a major role in Canada’s economy, offering thousands of entrepreneurs the opportunity to operate proven business models under established brands. However, the relationship between franchisors and franchisees can be complex, involving significant financial and legal commitments.
To promote fairness, transparency, and informed decision-making, Canadian law requires franchisors to provide potential franchisees with a franchise disclosure document (FDD) before any agreement is signed or money changes hands.
The purpose of franchise disclosure
Franchise disclosure is designed to ensure that prospective franchisees understand what they are buying into. It provides a full picture of the franchise opportunity—its financial expectations, operational requirements, risks, and the nature of the franchisor–franchisee relationship. By law, franchisors must disclose all material facts that could reasonably affect a franchisee’s decision to invest.
This requirement protects both parties: franchisees gain the information needed to make a sound investment decision, while franchisors reduce the risk of disputes and potential litigation arising from misrepresentation or lack of transparency.
Legal framework for franchise disclosure
Franchise disclosure in Canada is governed at the provincial level, as there is no overarching federal franchise law. As of 2025, six provinces have enacted franchise legislation: Ontario, Alberta, British Columbia, Manitoba, New Brunswick, and Prince Edward Island. Each has its own version of franchise law, but all share a common foundation based on the Uniform Franchises Act developed by the Uniform Law Conference of Canada.
The core principles of these laws are:
- Mandatory pre-sale disclosure of material facts;
- A duty of fair dealing between franchisors and franchisees; and
- A right of association, allowing franchisees to join or form associations without interference.
Timing and delivery requirements
Under provincial laws, franchisors must deliver a complete franchise disclosure document to a prospective franchisee at least 14 days before the franchisee signs any agreement or pays any money related to the franchise. This “cooling-off” period ensures that franchisees have adequate time to review the information, seek legal or financial advice, and fully understand their obligations.
The disclosure document must be clear, accurate, and complete, and it must be delivered in a single document—either in paper or electronic form. Failure to provide proper disclosure, or to provide it within the required timeframe, can have serious consequences for the franchisor.
What the disclosure document must contain
A compliant franchise disclosure document typically includes:
- Background information on the franchisor, including business history, corporate structure, and any bankruptcy or litigation history;
- Details of the franchise system, including fees, royalties, marketing contributions, and territorial rights;
- Financial statements of the franchisor;
- Lists of existing and former franchisees, allowing prospects to conduct due diligence;
- Training and operational support offered by the franchisor;
- Restrictions on goods and services that must be purchased from approved suppliers;
- Termination, renewal, and transfer provisions; and
- Any other material facts that could impact the value or viability of the franchise investment.
In addition, franchisors must attach copies of all agreements the franchisee will be required to sign, including leases, confidentiality agreements, or guarantees.
Consequences of non-compliance
Failure to comply with disclosure laws can be costly. If a franchisor provides no disclosure or a deficient disclosure, the franchisee may have the right to rescind (cancel) the franchise agreement within prescribed time limits—typically up to two years after signing. In such cases, the franchisor may be required to refund all payments, repurchase inventory, and compensate the franchisee for losses.
Franchisees can also pursue damages for misrepresentation or breach of the duty of fair dealing. Courts in Canada have consistently upheld franchisees’ rights to fair and honest treatment, reinforcing the importance of compliance.
The importance of professional advice
Franchise disclosure is a critical step in the due diligence process. Prospective franchisees should not rely solely on the franchisor’s statements but should engage lawyers, accountants, and franchise consultants to review the disclosure document carefully. Understanding the details—especially around fees, territorial rights, and exit clauses—can prevent costly surprises later on.
Tolerance and long-term ambitions. In an industry built on partnerships, informed consent remains the cornerstone of sustainable franchising success.
