Franchising in Canada: certifying your disclosure document

Turning an existing business into a franchise takes more than a well-drafted agreement. In some Canadian provinces, the disclosure document must include a franchisor’s certificate in a prescribed form. For a new franchise network, this step deserves a proper internal procedure: deciding who signs, which checks support their signature and which version of the document they are approving. Here is how to organise the process, using New Brunswick as a practical example.

Understand what the certificate entails

The franchisor’s certificate is neither government approval nor permission to sell franchises. It forms part of the disclosure package provided to the prospective franchisee and covers the statements set out in the applicable prescribed form. Signing it is therefore no substitute for checking the contents.

In New Brunswick, the Franchises Act governs matters including pre-contractual disclosure. The Disclosure Document Regulation, NB Reg 2010-92, requires a duly completed certificate in Form 1. The regulation also specifies who must sign and date it.

Manitoba also requires a certificate: the Franchises Regulation, Man Reg 29/2012, requires the certificate in Form 1 of Schedule B to be attached to the disclosure document. However, you should not assume that one province’s formalities apply in another.

First practical step: ask your legal adviser to confirm the prescribed form, eligible signatories and requirements for each province you intend to operate in, before preparing your franchise sales documentation.

Identify the right signatories from the outset

In New Brunswick, the signing rules are specific:

• If the franchisor is not incorporated, the franchisor must sign and date the certificate.
• If the franchisor is incorporated and has only one director or officer, that person must sign and date the certificate.
• If it has more than one officer or director, at least two of its officers or directors must sign and date the certificate.

The founder cannot therefore assume that their signature alone will suffice in every situation. Nor does a sales manager or external consultant become an eligible signatory simply because they prepared the document.

Before you begin marketing franchises, check the franchisor company’s records and the positions people actually hold. Identify eligible signatories, their availability and the time they will need to review the documents. This preparation avoids a last-minute scramble for a signature when a prospective franchisee is ready to proceed.

Prepare supporting checks for the signatories

A meaningful signature rests on verified information. For a business new to franchising, that information is often scattered across management, accounting, operations teams and external advisers.

Create an internal table with four columns: information to verify, supporting evidence, person responsible and verification date. This is a recommended management tool, not an additional statutory form.

In New Brunswick, the regulation requires information on matters including fees, guarantees and security required, financing offered, training and certain other forms of assistance. For each item, identify concrete supporting evidence: an approved fee schedule, a draft agreement, a budget or a training programme.

Signatories should be able to distinguish between three situations:

• The information is confirmed and supporting evidence is available.
• The information needs to be corrected in the document.
• An outstanding question must be resolved before signing.

Do not limit this review to the prescribed headings. Disclosure also covers material facts required by the applicable law. Information that is important to a prospective franchisee’s decision must not be left out simply because it does not appear in your table.

Match the certificate to the final disclosure package

The practical risk is straightforward: officers review one version, but an appendix or a commercial term is then changed before the package is sent. The documents delivered no longer match exactly what the signatories approved.

Follow a clear sequence: finalise the content, assemble the required documents, complete the legal review, obtain the necessary signatures, then check the integrity of the package to be delivered to the prospective franchisee. Give this version an internal reference number and keep the signed certificate, the complete disclosure document and the internal approvals together.

If a correction is made after signing, have it assessed to determine whether fresh approval or signatures are needed. Avoid routinely reusing a signed page from an earlier package.

Finally, the certificate does not remove the need to meet statutory deadlines. In New Brunswick, subject to applicable exceptions, the prospective franchisee must receive the disclosure document at least fourteen days before first signing an agreement relating to the franchise or making the first payment covered by the Act. A correctly signed certificate does not remedy late delivery.

Key takeaway: before offering your first franchise, prepare a checklist identifying the applicable form, eligible signatories, necessary checks and approved version. Make certification a documented decision, rather than a last-minute formality.