Franchising in Canada

Canadian Franchising Laws

For the most part, establishing a franchise business in Canada requires a lot less red tape than in the US, which is not necessarily all good or bad. You can get your business up and running in less time, but without disclosure rules you may invest in a business without fully understanding what you buying in to. Always do your due diligence and research a company's background before you signed on the dotted line, especially with a new or lesser-known franchise company. Check with the Canadian Counsel of Better Business Bureaus and consider consulting with a franchise consultant or attorney. In addition, consider going with a franchise company that belongs to organizations like the Canadian Franchise Association and International Franchise Association. The CFA requires its members to adhere to disclosure guidelines.

Even though franchise operators do not have to register or disclose franchise offerings made in Canada, except in Alberta and Ontario, there are some specific considerations that much be addressed, such as legislative requirements in certain regions and employee and tax issues. Franchise companies offering or advertising franchises for sale in Alberta must make pre-sale disclosures to prospective franchisees. The registration process in Alberta takes about 4-6 months. Ontario recently enacted the Arthur Wishart Act, which requires franchisors to provide a disclosure document to each prospective franchisee at least 14 days before related agreement is signed or any money changes hands. The New Civil Code of Quebec governs all relationships, contractual or otherwise, which are subject to Quebec Law. These laws were designed to protect the weaker party in the transaction but they by no means guarantee that your business will be a successful endeavor, nor do they negate the stress and anxiety associated with this large of a transaction or protect against poor economic conditions.

Other considerations include employees and taxation. By-and-large the Canadian government encourages visitors for pleasure and for work. However, before solidifying any deal on Canadian soil, be sure to carefully read the rules set forth in the federal Immigration Act, the North American Free Trade Agreement and the General Agreement on Tariffs and Trade. For instance, if an American-based franchisor sends personnel to Canada to train a Canadian-based master franchisor, it must be determined whether or not that individual would be exempt under the law governing non-temporary business visits. Payments made to such employees may be subject to a Canadian withholding tax.

Regarding repatriating profits, Canada does not impose any form of exchange or currency control on funds being repatriated to your home country. However, profits earned in Canada are subject to Canadian taxation.

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