Buying a Franchise in Ontario: Check for Changes Before You Commit

Receiving a disclosure document does not mean a franchise offer is set in stone. Between receiving it and committing to the purchase, an event may alter the costs, operating conditions or risks of the venture. To make an informed decision about joining a franchise network, you therefore need to check what has changed since the documents were provided. In Ontario, this due diligence is supported by a specific legal obligation.

Understanding the duty to disclose a material change

The Arthur Wishart Act (Franchise Disclosure), 2000 governs pre-contractual disclosure in Ontario. Subject to applicable exceptions, the franchisor must provide its disclosure document at least 14 days before you sign an agreement relating to the franchise or make a payment connected with it.

This duty does not end with the initial disclosure. If a material change occurs afterwards, the franchisor must provide a written statement about it as soon as practicable, before signing or payment.

A material change is not simply an interesting piece of new information. It is a change that could reasonably be expected to have a significant adverse effect on the value of the franchise or on your decision to acquire it. The distinction matters: a minor administrative amendment and a substantial new financial obligation do not carry the same implications.

Do not assume that a statement of material change automatically starts a fresh 14-day period. Ask your lawyer to assess what the change means for disclosure and the timing of your transaction.

Identifying events that warrant further checks

The aim is not to determine the legal status of every update yourself, but to identify information that deserves scrutiny before you commit. Several situations may warrant questions:

• an announced increase in mandatory equipment or fit-out costs;
• the loss of a key supplier that could disrupt the opening;
• a deterioration in the franchisor’s financial position;
• new litigation that could affect the operation of the network;
• a substantial alteration to the offer made for your outlet.

These examples are not a list of changes that automatically qualify as “material” under the law. Their status depends on the facts, their scale and their foreseeable consequences.

For each event, ask three questions: what has changed, when did it change, and how does it affect my plans? An increase in expenditure might be manageable for an already profitable outlet but could undermine your opening budget. Any alternative arrangement proposed by the franchisor should also be documented: its existence alone does not establish that it removes the risk.

Organising checks between disclosure and signing

As soon as you receive the disclosure package, keep a dated copy of the document and all its attachments. Clearly identify the versions of the proposed agreements. This will give you a point of comparison when new documents arrive.

Then keep a simple log recording the date of each new piece of information, its source, the documents affected and any outstanding questions. Distinguish confirmed facts from verbal explanations and working assumptions.

As signing approaches, ask the franchisor in writing whether any material changes have occurred since disclosure. Also request the relevant statements and supporting documents, where applicable. This is a practical precaution; it neither replaces the franchisor’s legal duty nor transfers its disclosure responsibility to you.

Pass the new information to your independent advisers. Your lawyer will assess the legal implications, while your accountant can evaluate the financial impact. Avoid sending them only a summary: the full documents allow them to check the terms, qualifications and dates.

Making a decision based on up-to-date information

Once the change has been explained, revisit the assumptions it affects: total investment, opening date, expenses, ability to meet repayments or operating arrangements. Compare your original plan with the updated one, rather than considering a new expense in isolation.

If crucial information remains uncertain, request a postponement of signing and have your existing commitments reviewed before making any payment. A pressing commercial deadline does not demonstrate that the risk is acceptable.

Failure to provide a required statement, or providing an inaccurate one, may have legal consequences. However, the remedies available depend on the facts and applicable time limits: seek legal advice promptly if you discover a problem after committing.

Key takeaway: before signing, compare the documents you received with the current situation. Have every change that could influence your decision explained and assessed, then commit on the basis of up-to-date information.