Franchise Lawyer, Canada



George A. Wowk

Burnet, Duckworth & Palmer LLP
2400, 525 - 8th Avenue S.W.
Calgary, Alberta, Canada
T2P 1G1

Tel:   (403) 260-0130
Cell:  (403) 370-5277
Toll Free:  (888) 370-5277
Fax:  (403) 260-0332

Email: gwowk@bdplaw.com
George A. Wowk is a lawyer at Burnet, Duckworth & Palmer LLP in Calgary, Alberta, Canada and he has been practising law since 1996. He practises in the areas of technology, intellectual property, Internet and franchise law.

George advises on all aspects of franchises, dealerships and distributorships, including advising on the setup and branding of franchises and the negotiation of franchise agreements.

For franchising, George provides legal advice on all aspects, including franchise agreements, franchise disclosure documents, branding, promotion, dispute resolution, franchise litigation and legal matters relating to the operation of franchise systems. He advises both franchisors and franchisees and his clients range from individuals wishing to purchase a franchise to franchisors of national franchise systems. He provides practical and solutions-oriented advice to his clients.

As well, George can assist with your general requirements in setting up your business, including incorporation, employment contracts, consulting agreements, non-disclosure agreements and registering trademarks.
 

 

Franchise Law Practise

    George provides legal advice in all areas of franchises, distributorships and dealerships. Some of the areas are listed below:

    Areas

    • Franchises
    • Dealerships
    • Distributorships
    • Franchise Disclosure Documents
    • Franchise System Development
    • Master Franchises
    • Trademark Registrations
    • Advertising and Promotion
    • Promotional Contests
    • Negotiations
    • Dispute Resolution

 

 

Education

    University of Alberta
    • Degree: Bachelor of Laws, April 1995
    Simon Fraser University
    • Degree: Bachelor of Business Administration (First Class Honours), April 1989
    • Computer Science Cooperative Education Program (four terms)
    Professional Development
    • Insight Conference - Negotiating Licensing Agreements
    • Continuing Legal Education - Intellectual Property Litigation
    • Simon Fraser University - The Securities Program
    • Canadian Securities Course

 

 

The Franchise Business

Introduction

Franchise businesses are everywhere and growing. It is difficult to drive down a street in a commercial part of a city without seeing a number of franchise businesses. For many individuals, they provide an enticing opportunity to own and operate their own business. For the franchisor, selling a franchise provides an opportunity to expand the reach of the franchise system without being concerned with the day-to-day operations of the individual franchised business.

These systems can be a wonderful opportunity for both parties and at the same time they can represent risks for both parties. Therefore, it is important for the parties to make an informed decision before entering into a franchise relationship and that an appropriate franchise agreement be in place.

Nature of the Franchise Relationship

Very generally, a franchise is a busIness where one party, the franchisor, establishes the branding and the manner by which the franchised business is to operate and the other party, the franchisee, becomes responsible for the day-to-day operations of the franchised business. In exchange for being permitted to own and operate the franchised business, the franchisee will make periodic payments to the franchisor and comply with the franchisor's specific operating requirements. Usually, for any given franchise system, there will be one franchisor and many franchisees. As well, there is no reason a franchisor cannot own and operate one or more franchises.

It is through the consistent use of the franchise branding and the consistency in the offering of the products and services by all franchisees that significant goodwill in the marketplace will be developed. This goodwill increases the value for both the franchisor and the franchisees.

Types of Franchise Businesses

Businesses that have been franchised come in all shapes and sizes. They include:
  • Fast food restaurants
  • Full service sit-down restaurants
  • Automotive services
  • Automotive dealerships
  • Employment and staffing
  • Cleaning
  • Coffee vendors
  • Moving and storage
  • Real estate brokerages
  • Retail sales
  • Fitness
  • Health and beauty
  • Security services
  • Hotels
  • Financial services
  • Pest control
  • Printing
  • Education
  • Dry cleaning
  • Lawncare
  • Weight control
  • Dating and introductions

Benefits of the Franchise Relationship

A franchise system enables the system owner to concentrate on developing and expanding the franchise system while not having the responsibility for the day-to-day operations of the franchise outlets. Each franchise outlet is typically owned and operated independently by a third party, the franchisee. This structure permits the system to grow significantly faster than it could otherwise.

From the franchisee's point-of-view, the franchisee is able to own and operate a business that may already have significant goodwill in the marketplace. As well, the franchisee is able to participate in a system that has already been proven to be successful. This removes a significant amount of the risk associated with starting up a business. As another benefit to the franchisee, the franchisor typically provides a significant amount of guidance to the franchisee in the day-to-day operations of the franchised business. Since the franchisor has already figured out what works and what does not work, the franchisee will not have to repeat the same mistakes that the franchisor has already made.

From the consumer's standpoint, a franchise system represents a known offering of goods and services. This reduces the risk to the consumer of an unsatisfactory experience. As an example, a consumer knows exactly what they will be getting when they order a Big Mac at a McDonalds, even though the customer may never have been at the particular McDonalds location. They will also have comfort in other matters such as the standards of cleanliness and safety that are maintained by McDonalds.

Risks of the Franchise Relationship

Of course, franchises have their risks. From the franchisor's point-of-view one of the most significant risks arises due to the loss of direct control over the manner in which the franchised business is operated. A single bad experience at a franchise outlet may result in a consumer not returning to any other franchise outlet in the future.

For the franchisee, there are also a number of risks and obligations. Most notable is the ongoing payments to the franchisor just for the right to operate the franchised business. These payments would not have to be paid if the franchisee started the business independently of the franchise system. However, these fees often represents the additional value to the franchisee due to brand recognition and the existing goodwill in the marketplace as well as the reduced risk through being able to own and operate a proven business model.

As well, another risk or limitation to the franchisee is that the franchised business must be operated within the strict requirements set by the franchisor. This may limit the modifications the franchisee may make to the product and service offering. This lack of control over the business may be a source of frustration for the franchisee as they may not be able to pursue available opportunities. However, most franchisors do provide for some flexibility as they recognise that market conditions may differ from location to location. For example, McDonalds offers the Ebi Filet-O in Japan, which is basically a burger made from shrimp meat.

By signing a franchise agreement, the franchisee is making a long-term commitment to operate the franchised business. If the franchised business is not profitable for any number of reasons, the franchisee could suffer substantial losses over an extended period of time. This potentially is a significant risk.

Franchise Agreements

The primary means of binding the franchisee and the franchisor in the franchise relationship is the franchise agreement. The franchise agreement contains the rights and obligations of the parties. Some of these agreements can be quite extensive.

Most franchisors will insist that the parties use their form of franchise agreement. Not surprisingly, the provisions in a franchise agreement typically favour the franchisor. However, as with all agreements, they are open to negotiation. However, many franchisors resist having their forms of agreements changed. The modifications to the franchise agreement that are acceptable to the parties is a matter of negotiation between the parties.

Often, the franchisee will be investing considerable time, effort and money in developing and running their franchised business. As well, the franchisee will likely be exposed to significant risk in the event the business does not work out. Therefore, it is important that an appropriate franchise agreement be in place.

From the franchisor's perspective, the franchise agreement needs to contain provisions that will protect the franchisor in the event the franchisee is not complying with all of the requirements of the franchise system. These requirements are there to ensure that the standards for services and products are maintained and that there is consistency between franchise outlets. Many franchise systems are extremely valuable and a single franchisee can create a significant amount of damage in a short period of time. Therefore, it is important that the franchise agreement properly protects the franchisor's interests.

While the terms of the franchise agreement generally favour the franchisor, a franchisee should take comfort that those terms will also apply to all other franchisees. Therefore, in the event another franchisee fails to operate in accordance with the requirements of the franchise system, the franchisor would have the ability to keep the franchisee in line. That, in turn, will serve to protect the value of the businesses of all franchisees. Think of the damage to the franchise system of a fast food restaurant if it become widely publicised that a single franchise outlet had a number of rats living within the premises.

Summary

Franchise legislation has been put in place in some provinces to protect the interests of franchisees. Primary among the protection provided is the requirement of the franchisor to deliver a franchise disclosure document to the potential franchisee. The intention is that the franchise disclosure document will help the potential franchisee make an informed decision before purchasing the franchised business and investing a significance amount of time, effort and money.

The franchise relationship can be a fairly complex relationship due to the amount of control that a franchisor needs over the franchisee. This complexity is then reflected in the franchise agreement, making these agreements long and complex. The franchise agreement will typically address the various rights and obligation of the parties and allocate the various risks between the parties. The parties need to spend adequate time considering these risks and weighing the appropriateness of the various provisions contained in the franchise agreement.

A franchise can be rewarding for both the franchisee and the franchisor. For the franchisor, through enlisting a franchisee to run the franchised business, the franchisor gets to expand the franchise system while at the same time having someone who is passionate about the business look after the day-to-day operations. For the franchisee, they get to own and operate a business that has been proven to be successful and to participate in the related financial rewards.

 

 

Presentations

Canadian Bar Association,
Alberta Business Law Subsection
- George was a guest presenter at the Canadian Bar Association, Alberta Business Law Subsection. He presented on "Intellectual Property Issues for Business Lawyers". A copy of the presentation can be found at the following link:

Licensing Executive Society,
Calgary Chapter
- George was a co-presenter at the Calgary Chapter of the Licensing Executive Society. He presented on 10 Cases/10 Clauses.

Legal Education Society of Alberta - George was the Chair of a Legal Education Society of Alberta program entitled "Business Law: Intellectual Property Issues". A copy of the program brochure can be found at the following link:
George presented on "Intellectual Property in Business Transactions". A copy of the presentation can be found at the following link:

Banff Venture Forum - George was a speaker at the "Back to Basics: IP Assets as Building Blocks of Value" workshop. This Banff Venture Forum workshop was hosted by Burnet, Duckworth & Palmer. One of his topic was "Copyright". A copy of the presentation can be found at the following link:

Banff Venture Forum - George was a speaker at the "Back to Basics: IP Assets as Building Blocks of Value" workshop. This Banff Venture Forum workshop was hosted by Burnet, Duckworth & Palmer. One of his topic was "Trade Secrets". A copy of the presentation can be found at the following link:

Calgary Technologies Inc. - George was a speaker at the "Lunch and Learn" hosted by Calgary Technologies Inc. The topic was Confidential Information. A copy of the presentation can be found at the following link:

Banff Venture Forum - George was a speaker at the "Papering the Dream" workshop. This Banff Venture Forum workshop was hosted by Burnet, Duckworth & Palmer. One of his topic was "Intellectual Property Rights: What Investors Want". A copy of the presentation can be found at the following link:

Canadian Institute Conference
Negotiating & Drafting Key Business Agreements
- George was a speaker at the "Negotiating & Drafting Key Business Agreements" conference hosted by the Canadian Institute. His topic was "Distribution Agreements". A copy of the presentation can be found at the following link:

Canadian Institute Conference
Negotiating & Drafting Key Business Agreements
- George was a speaker at the "Negotiating & Drafting Key Business Agreements" conference hosted by the Canadian Institute. His topic was "Legal Considerations in Outsourcing". A copy of the presentation can be found at the following link:

Lorman Education Services
Document Retention and Destruction in Alberta
- George was a speaker at the "Document Retention and Destruction in Alberta" conference hosted by Lorman Education Services. His topic was "Privacy Legislation". A copy of the presentation can be found at the following link:

Federated Press
- George was a speaker at the "Negotiaing and Drafting Major Business Agreements" conference hosted by Federated Press. His topic was "Outsourcing Agreement Negotiations". A copy of the presentation can be found at the following link:

Calgary Unix Users Group
- George was a speaker at the Calgary Unix Users Group and spoke on "Software Development and the Law". A copy of the presentation can be found at the following link:

Canadian Bar Association,
Alberta Technology & Intellectual Property Law Subsection
- George was a guest presenter at the Canadian Bar Association, Alberta Technology & Intellectual Property Subsection. He presented on "Considerations in Outsourcing". A copy of the presentation can be found at the following link:

Legal Education Society of Alberta - George was the Chair of a Legal Education Society of Alberta program entitled "Intellectual Property Update - 2006". A copy of the program brochure can be found at the following link:
George was also an instructor of the Licensing Workshop. A copy of the presentation can be found at the following link:

Student Technology Innovation Challenge
University of Calgary
- George was a Guest Lecturer at the Student Technology Innovation Challenge which was held at the University of Calgary. His topic was Technology and the Law. A copy of the presentation can be found at the following link:

CEO/CFO Certification
Insight Information Co.
- George was a speaker and contributing author at this Insight conference. His topic was "Outsourcing and Service Provider Issues for Certification". A copy of the presentation can be found at the following link:

Legal Education Society of Alberta - George was the Chair of a Legal Education Society of Alberta program entitled "Intellectual Property for Business Lawyers". Information on this program can be found at the following link:
George also presented on the topic of "Intellectual Property in Business Transactions". A copy of the presentation can be found at the following link:

Project Management Institute of Southern Alberta - George was a speaker at the Project Management Institute of Southern Alberta dinner meeting. A description of the meeting can be found here:
A copy of the presentation can be found at the following link:

IT Conference and Technology Exposition
Convergence 2004
- George presented at this Technology Exposition and his topic was "Legal Issues Arising in IT Outsourcing". A copy of the presentation can be found at the following link:
 

 

Papers

Legal Education Society of Alberta - George was the Chair of a Legal Education Society of Alberta program entitled "Business Law: Intellectual Property Issues". A copy of the program brochure can be found at the following link:
George was also an instructor of the "Intellectual Property in Business Transactions" session. A copy of the paper can be found at the following links:

Confidential Information - George wrote on confidential information and non-disclosure agreements. The brochure found at the following link:

Legal Education Society of Alberta - George was the Chair of a Legal Education Society of Alberta program entitled "Intellectual Property Update - 2006". A copy of the program brochure can be found at the following link:
George was also an instructor of the Licensing Workshop. A copy of the paper can be found at the following links:

CEO/CFO Certification
Insight Information Co.
- George was a speaker and contributing author at this Insight conference. His topic was "Outsourcing and Service Provider Issues for Certification". A copy of the paper can be found at the following links:

Legal Education Society of Alberta - George was the Chair of a Legal Education Society of Alberta program entitled "Intellectual Property for Business Lawyers". Information on this program can be found at the following link:
George also presented on the topic of "Intellectual Property in Business Transactions". A copy of the paper can be found at the following links:

Canadian Privacy Law Review
LexisNexis Canada Inc.
- George's paper entitled "Privacy Issues in Corporate Transactions" was published in the Canadian Privacy Law Review. A copy of the paper can be found at the following link:

IT Conference and Technology Exposition
Convergence 2004
- George presented at this Technology Exposition and his topic was "Legal Issues Arising in IT Outsourcing". A copy of the presentation can be found at the following link:
 

 

Memberships and Affiliations

  • Registered Canadian Trademark Agent
  • Intellectual Property Institute of Canada
  • Canadian IT Law Association
  • Licensing Executives Society
  • Law Society of Alberta
  • Law Society of Alberta, Continuing Professional Development Committee
  • Canadian Bar Association
 

 

Contact Information