Franchising in Canada: planning multiple openings

Your business is doing well, and a prospective franchisee wants to open several outlets rather than just one. This proposal could accelerate your expansion, but it also concentrates the demands for funding, management and support. Before committing, prepare a development agreement that sets out how each opening will proceed, without confusing commercial ambition with actual capacity. Within a franchise network, a workable timetable protects both the franchisor and the franchisee.

1. Choose the right contractual structure

In Canada, a franchise network can expand through individual franchise agreements, a development agreement or a master franchise agreement, among other arrangements. These structures serve different purposes.

For an entrepreneur who wants to operate several outlets themselves, a development agreement can set the number of openings and their timetable, with a separate franchise agreement for each outlet. Depending on its terms, a master franchise agreement may allow the master franchisee to recruit sub-franchisees and take on certain franchisor functions. It therefore calls for a different organisational structure, not simply more locations.

Before drafting your proposal, clarify:

• who will operate each outlet and sign each agreement;
• whether separate companies will be used for the different outlets;
• whether the candidate will only be allowed to operate their own outlets or will also be able to grant sub-franchises;
• how the development agreement will work alongside the individual agreements.

There is no standard franchise agreement that suits every business. Have the structure tailored to your business model rather than turning a single-unit agreement into a broad promise of expansion.

2. Build the timetable around actual capacity

The success of an existing outlet does not automatically demonstrate that a franchisee can open several at once. The additional challenge often lies in oversight: recruiting managers, allocating cash and keeping the first outlets running while opening subsequent ones.

Use your pilot outlet to identify the stages needed for an opening: preparation, recruitment, training, fit-out and launch. Distinguish between tasks that can run in parallel and those that depend on prior approval. These observations provide a basis for a timetable, not a guarantee that every location will take the same time.

Assess your own resources too. Can you train several teams at once? Who will support a new outlet if another runs into difficulties? A commitment to multiple openings must remain compatible with your capacity to provide support.

Then prepare three scenarios: normal progress, a short delay and a prolonged postponement. For each, identify the costs incurred, the resources committed and the decisions required. This will give you a practical basis for negotiating realistic deadlines.

3. Turn dates into verifiable obligations

A contractual timetable must explain what it means to ‘open’. Does this mean starting construction work, welcoming the first customers or launching full operations? An imprecise definition can lead to a dispute even when both parties believe they are meeting their commitments.

For each outlet, record the interim milestones, the supporting evidence required and each party’s responsibilities. In particular, include an approval checkpoint before substantial expenditure is committed to the next outlet.

The agreement should also address delays: notification, supporting documents, any period allowed to remedy a breach and the procedure for requesting an extension. Distinguish between difficulties attributable to the developer and those arising from the franchisor’s commitments or external events.

Above all, avoid ambiguity about how a delay to a future opening could affect outlets already operating. Have the agreement specify whether the loss of development rights affects only unopened outlets or could also affect existing agreements. Clauses linking defaults across several agreements warrant careful legal review.

4. Disclose the overall commitment before entering into it

Canada has no general federal franchise disclosure regime. Specific obligations are set at provincial level. In Ontario, the Arthur Wishart Act (Franchise Disclosure), 2000 requires, among other things, pre-contractual disclosure and a minimum waiting period of fourteen days, subject to applicable exceptions, before a franchise-related agreement is signed or a payment is made.

Do not therefore assume that a development agreement can be signed immediately because the individual agreements will follow later. Obtain advice on the obligations that apply to the initial agreement and then to the grant of each outlet, according to the provinces concerned.

The disclosure provided must make the overall commitment clear: the timetable, payments, opening conditions and consequences of a breach, together with the required material facts and contractual documents. In Quebec, which has no franchise-specific legislation, the Civil Code of Québec governs matters including general duties of disclosure and good faith.

Key takeaway: before promising multiple openings, prepare an operational timetable, define the consequences of delays and have the disclosure for the full set of agreements checked. Achievable, phased expansion is better than a series of deadlines that cannot be met.