A franchise agreement is the legal instrument by which a franchisor grants the exclusive right to use its business system to operate a retail outlet under its banner, within a given territory, to a franchisee, who undertakes to operate the franchise in compliance with the franchisor’s business model. Under this type of agreement, the franchisor receives a royalty on the proceeds of the franchisee’s sales.

In Quebec, there are no laws that specifically regulate franchises, which poses a number of challenges.

We recommend using this template when a business develops a concept or a process that is unique, which it hopes will be quickly adopted to expand its market share in a geographic area. For a franchise to be successful, a franchisor must have sufficient material and human resources to enable it to spread its know-how to potential franchisees and, over time, for the purpose of managing a network of franchisees. Unlike the Dealership Agreement (template K04200) and Lease Management Agreement (template K06500), the franchise agreement focuses more on an integrated concept, than the sale of a particular product (e.g. fast-food industry where many restaurants are subject to a single-unit franchise agreement).

This agreement differs from the master franchise agreement because it covers only a single outlet, whereas the latter covers a geographic area capable of receiving multiple unit franchises and includes the obligation to establish such unit franchises.

0.00 INTERPRETATION
0.01 Definitions
0.01.01 Activities
0.01.02 Agreement
0.01.03 Articles
0.01.04 Authorized Shareholder
0.01.05 Best Efforts
0.01.06 Breach
0.01.07 Business
0.01.08 Business Operations
0.01.09 Business Site
0.01.10 Concept
0.01.11 Confidential Information
0.01.12 Control
0.01.13 Corporation
0.01.14 Designated Manager
0.01.15 Encumber or Encumbrance
0.01.16 Fiscal Year
0.01.17 Force Majeure
0.01.18 Franchise
0.01.19 Franchisees
0.01.20 Full Term
0.01.21 Gross Revenue
0.01.22 Group
0.01.23 Incapable
0.01.24 Initial Franchise Fees
0.01.25 Intellectual Property
0.01.26 Law
0.01.27 Lease
0.01.28 Legal Representatives
0.01.29 Network
0.01.30 Operations Manual
0.01.31 PARTY
0.01.32 Person
0.01.33 Prime Rate
0.01.34 Products
0.01.35 Protected Territory
0.01.36 Related Person
0.01.37 Shared Advertising Fund
0.01.38 Shareholder
0.01.39 Signage
0.01.40 Supplier
0.01.41 Trademarks
0.02 Entire Agreement
0.03 Governing Law
0.04 Non-Compliance
0.04.01 Severability
0.04.02 Substitute Provision
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 No Waiver
0.05.03 Time and Days
a) Time of the Essence
b) Computation of Time
c) Delays
0.05.04 Financial References
0.05.05 Cross-References
0.05.06 Gender and Number
0.05.07 Headings
0.05.08 Presumptions
0.05.09 Knowledge
0.05.10 Approval
0.05.11 Accounting Standards
1.00 PURPOSE
1.01 Legal Transaction
1.02 Conditions Required by FRANCHISEE
1.03 Conditions Required by FRANCHISOR
1.04 Unsatisfied Condition(s)
2.00 CONSIDERATION
2.01 Initial Franchise Fees
2.02 Royalties
2.03 Advertising
2.03.01 Opening Advertising
2.03.02 Contribution to Shared Advertising Fund
a) Annual Contribution
b) Special Contribution
c) Non-Refundable
2.04 Supplies
2.04.01 Price Indicated
2.04.02 Maximum Retail Price
2.04.03 Lowest Price
3.00 TERMS OF PAYMENT
3.01 Initial Franchise Fees
3.02 Royalties
3.03 Advertising
3.03.01 Opening Advertising
3.03.02 Contribution to Shared Advertising Fund
3.04 Supplies
3.04.01 Compliance with Required Terms
3.04.02 Certified Cheque
3.04.03 Default
3.04.04 Surcharge
3.04.05 Payment of Products
a) Method
b) Returned Cheques
3.05 Waiver of Compensation
3.06 Allocation of Payments
3.07 Interest
3.08 Loss of Term
3.09 Reimbursement of Legal Costs
4.00 SECURITY
4.01 Movable Hypothec Without Delivery
4.01.01 Granting
4.01.02 Registration
4.01.03 Subordination
4.02 Suretyship
5.00 MUTUAL REPRESENTATIONS AND WARRANTIES
5.01 Status
5.02 Authority
5.03 Binding Agreement
5.04 Canadian Resident
5.05 Commission
5.06 Nominee
5.07 Disclosure
5.08 Solvency
6.00 REPRESENTATIONS AND WARRANTIES OF FRANCHISOR
6.01 Status
6.02 Authority
6.03 Binding Agreement
6.04 Nominee
6.05 Disclosure
6.06 Legal Proceedings
6.07 Intellectual Property
6.08 Solvency
7.00 REPRESENTATIONS AND WARRANTIES OF FRANCHISEE
7.01 Status
7.02 Authority
7.03 Binding Agreement
7.04 Insurance
7.05 Disclosure
7.06 Operating Permits
7.07 Legal Proceedings
7.08 Fiscal Situation
7.08.01 No Default
7.08.02 Payment of Taxes and Costs
7.08.03 Deductions
7.09 Solvency
7.10 Conflict of Interest
7.11 Nominee
7.12 Understanding
7.13 No Representation
8.00 MUTUAL DUTIES AND OBLIGATIONS
8.01 Legal Proceedings
9.00 DUTIES AND OBLIGATIONS OF FRANCHISOR
9.01 Cooperation
9.02 Initial Contributions
9.03 On-going Contributions
9.04 Intellectual Property
9.04.01 Protection
9.04.02 Registration
9.04.03 Discretion
9.05 Advertising
9.05.01 Shared Advertising Fund
a) FRANCHISOR’s Contribution
b) Deductions
c) Separate Accounting
d) Annual Financial Statement
e) Balance of Shared Advertising Fund
9.05.02 Opening Publicity
9.05.03 Best Efforts
9.06 Supplies
9.06.01 Best Efforts
9.06.02 Liability
9.06.03 Initial Order
9.06.04 Allocation of Supplies
a) Undertaking
b) Shortage
c) Allocation of Products Purchased on Special
9.06.05 Modifications
9.07 Compliance with Protected Territory
9.08 Approval of Initial Designated Manager
9.09 Training
9.09.01 Notice to FRANCHISEE
9.09.02 Costs
a) “At the FRANCHISEE’s expense”
b) Preparation and Communication Costs
9.09.03 Electronic Media
10.00 DUTIES AND OBLIGATIONS OF FRANCHISEE
10.01 Legal Organization
10.01.01 FRANCHISEE is a Natural Person
a) Corporate Name
b) Incapacity
i) Nomination of Mandatary
ii) Weekly Reports
iii) Replacement
10.01.02 FRANCHISEE is a Corporation
a) Incorporation and Articles
b) Registration
10.01.03 FRANCHISEE is a Partnership
a) Registration
b) Partnership Agreement
i) Content
ii) FRANCHISOR’s Approval
iii) Copy
c) Limited Partner is a Corporation
10.02 Continuation as a Corporation
10.03 Operating Permit
10.04 Identification by Corporate Name
10.05 Collaboration with FRANCHISOR
10.06 Lease
10.06.01 Sole Responsibility
10.06.02 Third Party is Owner or Lessor of Business Site
a) FRANCHISOR’s Choice
b) FRANCHISOR as Principal Tenant
c) FRANCHISOR as Subtenant
10.06.03 FRANCHISOR as Owner or Lessor of Business Site
10.06.04 FRANCHISEE as Owner or Lessor of Business Site
a) Signing an Agreement
b) Terms
c) Written Agreement with Related Person
10.06.05 No Business Site Chosen
a) Best Efforts
b) FRANCHISOR’s Approval
c) Deadline
10.07 Business Site (Opening, Management and Relocation)
10.07.01 Preopening Approval
10.07.02 Opening Days and Hours
10.07.03 Use of Business Site
10.07.04 Layout of Business Site
a) General Undertaking
b) Information, Standards and General Specifications of FRANCHISOR
c) Plans and Specifications
d) Decor
e) Signage Identifying the Business
f) Displaying Products
10.07.05 Maintaining Premises
a) Standards
b) Glass
c) Service Agreements
d) Failure to Make Corrections
10.07.06 Redecorating
a) Required by FRANCHISOR
b) Desired by FRANCHISEE
10.07.07 Relocating Premises (during term of Lease)
10.07.08 Relocating Premises (termination or expiry of Lease)
a) Deadline
b) Provisions Apply to New Business Site
c) Removing Signage from Previous Business Site
d) Redefining term “Business Site”
10.08 Financing
10.08.01 Current Ratio
10.08.02 Debt-to-Equity Ratio
10.08.03 Additional Investment
10.09 Designated Manager
10.09.01 Role
10.09.02 Additional Franchise
10.09.03 Authority
10.09.04 FRANCHISEE is Corporation
10.09.05 Replacement
10.09.06 Provisional Operation
10.10 Human Resources
10.10.01 Responsibilities
10.10.02 Training
a) Responsibility
b) Initial Required Course
c) Required Training
i) Remedial Training
ii) Continuing Training for Employees
d) Costs
i) “At the FRANCHISEE’s expense”
ii) Preparation and Communication Costs
10.10.03 Bilingualism
10.10.04 CCST
10.10.05 Certification Notice and Collective Agreement
a) Collaboration
b) Collective Agreement or Other Agreement
c) Strike or Lock-out
10.11 Supplies
10.11.01 Exclusivity of Procurement
a) Undertaking
b) Supply Agreements
10.11.02 Approval of Additional Suppliers
a) Undertaking
b) Trade Secret
c) Requirements
i) By FRANCHISEE
ii) Samples
iii) Uniformity
d) Withdrawal of Approval
10.11.03 Purchases by FRANCHISOR
a) Initial Order
b) Required Allocation
10.11.04 Delivery
a) Transportation Costs
b) Hours
c) Receiving
d) Costs of Rerouting
e) Increase in Price After Ordered
10.11.05 Inventory
10.11.06 Product Warranty
10.11.07 Transfer of Property
10.11.08 Default by FRANCHISEE
10.12 Sales Objectives
10.13 Customer Service
10.13.01 Undertaking
10.13.02 Treating Complaints
10.14 Upholding Quality and Presentation Standards
10.15 Operations Manual
10.15.01 Duty to Comply
10.15.02 Amendments
10.15.03 Precedence
10.15.04 Ownership
10.15.05 Confidential Nature
a) Procedure
b) Access and Disclosure
i) Undertaking and Confidentiality
ii) Liability
10.16 No Guarantee
10.16.01 Regarding Results
10.16.02 Regarding Profits
10.17 Advertising
10.17.01 Acknowledgment
10.17.02 Shared Advertising Fund
10.17.03 Opening Publicity
10.17.04 Local Publicity
a) By FRANCHISEE
b) Shared
10.17.05 Prohibition
10.17.06 Stopping/Withdrawing Publicity
10.17.07 Advertising Material
10.17.08 Promotions, Certificates and Coupons
10.18 Inspections
10.18.01 Access
10.18.02 Collaboration
10.18.03 Samples
10.18.04 Inspector’s Judgment
10.18.05 Health and Safety
a) FRANCHISOR’s Notice
b) Temporary Closure
c) Liability
10.18.06 Corrections
a) Undertaking
b) Time Limit for Corrections
c) Default
10.19 Research and Development
10.19.01 Cooperation
10.19.02 Improvements
10.20 Insurance
10.20.01 Coverage
10.20.02 Copy
10.20.03 Additional Insurance
10.20.04 Non-Compliance
10.20.05 Use of Proceeds
10.21 Indemnification of FRANCHISOR
10.22 Intellectual Property
10.22.01 Right to Use
a) Conditions
b) Non-Exclusive Right
10.22.02 Property of FRANCHISOR
a) Improvements
b) No Right to Ownership
10.22.03 Licences
10.22.04 No Opposition
10.23 Non-Competition
10.23.01 Scope
10.23.02 Violation
a) Automatic Penalty
b) Payment
c) Protective Measures
10.23.03 Reasonable Cause
10.24 Non-Solicitation of Personnel
10.24.01 Scope of Undertaking
10.24.02 Violation
a) Automatic Penalty
b) Payment
c) Protective Measures
10.25 Accounting
10.25.01 Recording of Sales
10.25.02 Records and Books
10.25.03 Accounting Reports
a) Submission
b) No Acceptance
c) Without Prejudice
10.25.04 Systems
10.25.05 Financial Statements
10.25.06 Auditors
10.25.07 Inspection of Accounts
a) Procedure
b) Inspection Costs
c) Penalty
d) Inadequate Reports
e) No Prejudice
f) Final Report
10.25.08 Fiscal Year
10.25.09 Conservation of Documents
a) Duration
b) Return
10.25.10 Taxes
10.26 Confidential Information
10.26.01 Undertaking
10.26.02 Duration of Undertaking
10.26.03 End of the Agreement
a) Request for Return
b) Destruction
10.26.04 Penalty
a) Amount
b) Interest
c) Payment
11.00 SPECIAL PROVISIONS
11.01 Relationship Between the PARTIES
11.01.01 Independent Contractor
11.01.02 Exempt from Other Rules
11.02 Additional Franchise Necessary
11.02.01 FRANCHISEE’s Request
11.02.02 Reduction of Protected Territory
11.03 Transfer and Assignment by FRANCHISOR
11.03.01 Internal
11.03.02 External
11.04 Encumbrances
11.04.01 Undertaking
11.04.02 Requesting Permission
a) Standard Conditions
b) Special Conditions
11.05 Sale, Assignment and Transfer by FRANCHISEE
11.05.01 Restrictions
11.05.02 Void and Without Effect
11.05.03 Assignment to a Controlled Corporation
11.05.04 Assignment by FRANCHISEE to a Third Party
a) Transmitting Request to FRANCHISOR
b) Additional Information
c) Right of First Refusal
d) Right of First Refusal not Exercised
i) Time Limit to Approve or Refuse
ii) Criteria to Review Request
iii) Other Reasonable Conditions
iv) Transfer Closing Conditions
v) Assignment Approved
11.05.05 Assignment Fees
a) Legal Fees and Other Disbursements
i) Amount
ii) Terms of Payment
iii) Non-Refundable
b) Assignment by FRANCHISEE to a Third Party
11.06 Required Transfer (Death, Incapacity or Resignation)
11.06.01 Time Limit
11.06.02 Medical Proof
11.06.03 Conditions
a) Applicable Provisions
b) Costs in Event of Death
11.06.04 Provisional Operation
11.07 Provisional Operation
11.07.01 Events
11.07.02 Costs
11.07.03 Management Standards
11.07.04 No Liability
11.08 Calculating Gross Revenue
11.08.01 Scope
11.08.02 Calculation
a) Amounts Included
b) Amounts Excluded
c) Deductions
d) No Effect on Calculation
i) Bad Debt
ii) Date of Payment
11.09 Force Majeure
11.09.01 No Default
11.09.02 Duty
11.09.03 Rights of Other PARTY
11.10 Further Assurances
11.11 Reimbursement of Legal Costs
11.12 Remedies
11.12.01 Election
11.12.02 No Limitations
12.00 GENERAL PROVISIONS
12.01 Notice
12.01.01 Place of Delivery
12.01.02 Date of Receipt
12.01.03 Delivery to Franchisees or Sureties
12.02 Dispute Resolution
12.02.01 Good Faith Negotiations
12.02.02 Mediation
a) Process
b) Mediator
c) Settlement
d) Legal Proceedings [OR Arbitration]
12.02.03 Arbitration
a) Notice
b) Reply
c) Appointment of Third Arbitrator
d) Subcontracts
e) Confidentiality
f) Hearing
g) Ruling
h) Costs
i) Supplementary Rules
12.03 Election
12.04 Counterparts
12.05 Amendment
12.06 No Waiver of Rights
12.07 Electronic Transmission
12.08 Language
13.00 TERMINATION
13.01 Expiry of Term
13.02 Mutual Consent
13.03 Early Termination
13.03.01 No Lease
a) Time to Cure Default
b) Default not Cured
13.03.02 Initial Training Not Completed
13.04 Termination Without Time to Cure Default
13.04.01 Date of Defaut
13.04.02 After Receiving Notice
13.05 Termination With Time to Cure Default
13.06 Procedure Upon Expiry or Termination
13.06.01 Application
13.06.02 Release
13.06.03 Payment of Sums Due
a) Amounts Due to the FRANCHISOR
b) Initial Franchise Fees
13.06.04 Pending Orders
13.06.05 Purchase Inventory
a) Option
b) Detailed Inventory
i) Time Limit
ii) Default
c) Delivery
d) Encumbrance
13.06.06 Purchase of Furniture
a) Option
b) Taking Possession
c) Payment
d) Determining Price
e) Balance
f) Presumption
13.06.07 Business Site
a) Sublease by FRANCHISOR
i) Option
ii) Surrender of Business Site
b) Repossession of Business Site by FRANCHISOR
c) Continuation of Business Operations
d) Return of Remaining Property
13.07 Effect of Termination
13.07.01 Remedies and Survival
13.07.02 Representation
13.07.03 Restrictive Covenants
13.07.04 Business Site
a) Unauthorized Occupation
b) Authorized Occupation
i) Prohibition
ii) Changes to Physical Appearance
13.07.05 Software and Systems
14.00 EFFECTIVE DATE
14.01 General Effective Date
14.02 Exceptions
14.02.01 Retroactive
14.02.02 Deferral
15.00 DURATION
15.01 Initial Term
15.02 Renewal
15.02.01 Automatic Renewal
15.02.02 Conditions
15.03 Non-Renewal
15.04 Continuation of Business Relations
16.00 SCOPE



SCHEDULE A – EXCERPT OF A RESOLUTION OF THE FRANCHISOR
SCHEDULE B – EXCERPT OF A RESOLUTION OF THE FRANCHISEE
SCHEDULE C – INTERVENTION OF THE DIRECTORS, OFFICERS AND SHAREHOLDERS
SCHEDULE 0.01.09 – BUSINESS SITE
SCHEDULE 0.01.14 – INITIAL DESIGNATED MANAGER
SCHEDULE 0.01.35 – PROTECTED TERRITORY
SCHEDULE 0.01.41 – TRADEMARKS
SCHEDULE 4.01 – MOVABLE HYPOTHEC WITHOUT DELIVERY
SCHEDULE 4.02 – SURETYSHIP
SCHEDULE 10.06.02 (b) (i) – LEASE (SAMPLE PROVISIONS)
SCHEDULE 10.22.03 – LICENCE AGREEMENT