A franchise, under the eyes of the law, must contain the following three items:

1. A requirement (direct or indirect) to spend money;
2. The grant of a trade mark, logo, or other commercial symbol; and
3. The franchisor exercising any element of control.

In practice, it is the ability for a franchisee to use the logo and established system of the franchisor in a separate geographic location.

A franchise disclosure document (“FDD”) is an instrument that sets out all material information about the franchisor and the franchise system before you buy in.

It will include information like startup and operating costs, the franchisor’s background, litigation and bankruptcy history, financial statements, and other key system details. It also contains drafts of all agreements you’ll be asked to sign, most importantly the franchise agreement, which governs the entire relationship (term, fees, territory, rights, defaults, etc.).

By law, you must receive the Franchise Disclosure Document at least 14 days before you can be asked to sign anything or pay.

It is typically very long because provincial laws require extensive disclosure to address the power imbalance between franchisor and franchisee.

From a franchisee perspective, the focus should be on whether the system actually makes sense for you in terms of time, capital, and support. From a franchisor perspective, the FDD is both a compliance document and a sales tool.

The provinces of Ontario, Manitoba, Alberta, British Columbia, Prince Edward Island, New Brunswick, and Saskatchewan each have franchise disclosure laws, while the rest treat franchising as a standard contract.

In those non-disclosure provinces, there is no requirement to provide a franchise disclosure document or a 14-day waiting period; the franchisor can simply present the agreements they want signed.

In the disclosure provinces, an FDD will generally be considered “proper” if it includes all information required by the applicable legislation, although not every minor imperfection will make it defective; whereas more fundamental omissions, like missing financial statements, can.

The required disclosure is broadly consistent across these provinces, covering items such as startup costs, franchisor background, management history, litigation and bankruptcy, financial statements, and dispute resolution terms, which allows a single franchise disclosure document to often be used across multiple jurisdictions with limited customization.

The American experience can be more regulated than the Canadian one as there are some states which require franchisors to register their franchise disclosure document with the relevant government agency, while others do not.

While the purpose behind franchise disclosure in the USA remains the same as north of the border, American franchise disclosure laws state the exact order of the presentation of information. For instance, the 19th item must be financial projections. In Canada, the franchise disclosure laws require certain information to be contained within the franchise disclosure document but does not prescribe the order. Some American states may also require the franchise disclosure document to be published online for public view where no Canadian provinces have this requirement.

Similar to the purchase of residential real estate, the franchisor, naturally, wants to ensure the prospective franchisee has genuine intent and the financial capacity to proceed with the franchise system.

However, a franchisor must ensure the deposit is refundable, should the franchisee not with to proceed with the system, and it cannot exceed 20% of the franchisee fee, to a maximum of $100,000.00.

A franchisor may decide to provide a franchise disclosure document in a non-disclosure province for many reasons, such as clear expectation setting with the estimated costs to set up a franchise, consistency across a national system, and to provide every franchisee with the same information.

However, when using a franchise disclosure document in a non-disclosure province, the franchise disclosure document needs to be customized to that province. For instance, omitting the list of existing and previous franchisees for privacy related reasons along with the franchisor’s financial statements.

As of May 2026, the current provinces that require an FDD are: Alberta, British Colombia, Manitoba, New Brunswick, Ontario, and Prince Edward Island. 

It means the franchisor cannot open another franchised location within the prescribed boundary. Ensure to look out for where that area is such as low traffic areas, redevelopments, saturated markets, etc.

Most franchise systems we have come across say the franchisor will only be obligated to respect the territory if the franchisee is in compliance with the franchise agreement.

There are also other ways the territory can change, for instance, population change. As a young brand, a franchisee may have been provided with all of Calgary. But as that brand matures and the population increases, a franchisor may wish to carve Calgary into three territories. Check to see if your franchisor can alter the territory, and if so, what that process looks like.