A franchise is a contract or arrangement between two or more persons in which a franchisee (buyer) is required to pay a fee for the right to engage in a business which is associated with the franchisor's (seller) trademark, trade name, logo type, advertising or any business symbol designating the franchisor or its associates.
If you are considering purchasing a franchise, take precautions such as
Warning signs to look for
The Franchises Act requires the franchisor to provide, full, plain and true disclosure of all material facts relating to the franchise being offered. This information is supposed to ensure a prospective purchaser has the necessary information to make an informed investment decision.
The Franchises Act also provides a cooling off period of four business days after the franchise purchasers receives the prospectus or statement of material facts. Franchise purchasers may, within that four-day period, withdraw without obligation from deals, if they can contact the franchise sellers.
Compliance with the requirements of the Franchises Act may be very time consuming and costly. Failure to comply with the Act can have very serious consequences. Amoung these are:
The previous information was provided by Business Opportunity and Franchise Frauds, Alberta Securities Commission.
The Franchises Act can be viewed online at qp.alberta.ca or a copy can be ordered by calling 1-877-427-4088.