Buying a Franchise in Canada: Check Permits Before You Commit

Buying a franchise gives you access to a brand and an operating model, but does not automatically provide the approvals needed to run the business. In Canada’s franchise sector, requirements can vary between provinces and municipalities. Before you commit, check that the concept can operate legally at your proposed address, with the services and equipment you intend to provide.

1. List the approvals you need

Start by describing exactly what the future business will do. ‘Food retail’ or ‘home services’ is not specific enough: preparing food on site, selling alcohol, caring for children, providing personal care or carrying out work in customers’ homes can each trigger different requirements.

Ask the franchisor for a list of the permits and approvals usually required for its concept. Treat this as a starting point, not confirmation of local compliance. An outlet operating in another town or city is no proof that your project will be authorised.

Depending on the activity and location, check in particular:

• whether the proposed use complies with municipal zoning rules;
• requirements for building, alteration or occupancy permits;
• business, health or activity-specific permits;
• rules governing signage, outdoor seating areas and outdoor installations;
• any professional qualifications required of operators or staff.

Contact the relevant authorities with a written description of the project. Ask which steps must be completed before work begins and which require an inspection after completion. Keep their responses and the contact details of the people you consult.

2. Check that the brand’s model is compatible

The question is not simply whether a permit is available. You need to check whether the features required by the brand will allow you to obtain it.

For example, a restaurant concept may depend on particular cooking equipment. Installing it may raise issues relating to ventilation, fire safety or layout. A mobile service may also be subject to local rules, even without premises open to the public.

Compare the prescribed plans and equipment with the requirements set out by the authorities. If changes are needed, ask the franchisor whether it will allow them and what approval process applies. Approval from the brand does not replace permission from a public authority, and the reverse is also true.

Also clarify who checks that the products or services offered comply with applicable requirements. The Alberta government’s guide for franchise buyers specifically recommends checking government standards that apply to products or services, along with restrictions on their use or licensing. This deserves a separate place in your due diligence.

3. Allocate tasks, costs and risks

Create a simple table covering the approval required, the responsible authority, the applicant, supporting documents, fees, prerequisites and validity period. Add a column stating who is responsible for remedial work if an application is refused or an inspection identifies non-compliance.

Get written clarification of the respective responsibilities:

• who prepares and submits each application;
• who supplies plans and technical supporting documents;
• who pays for inspections, alterations and renewals;
• who monitors deadlines after opening.

Then review the contractual timetable with your lawyer. What happens if an essential approval is delayed or refused? Do payment obligations or the opening deadline still apply? You may need to negotiate an extension or a condition making your commitments dependent on obtaining approvals; neither is automatic.

Work with your accountant to estimate not only administrative fees but also the cost of meeting compliance requirements. Use quotations and local information rather than a standard figure quoted for the sector as a whole.

4. Distinguish disclosure from permission to operate

In Canada, franchise-specific rules fall under provincial jurisdiction. They do not replace the approvals needed for your business activity.

In Alberta, the Franchises Act and its regulation govern matters including pre-contractual disclosure. Subject to applicable exemptions, the franchisor must provide a disclosure document at least 14 days before a franchise-related agreement is signed or a franchise-related payment is made, whichever occurs first. The document must include material facts relating to the franchise. Receiving it does not mean that a public authority has approved your project.

Quebec has no franchise-specific legislation imposing this disclosure regime. The general provisions of the Civil Code of Québec apply, particularly those concerning contracts and good faith. Municipal rules and activity-specific requirements must also be followed.

Key takeaway: before you commit, obtain a locally verified list of approvals, a written allocation of responsibilities and contractual provisions addressing the risk of refusal. Brand recognition is no substitute for any of these checks.