I am a Franchisor and an existing Franchisee is selling their business.

The Franchisee has given the buyer a copy of their existing Franchise Agreement and Disclosure Document. With the recent amendment to the Code, what are the restrictions on me, as a Franchisor, accepting deposit monies from the incoming Franchisee?

The Code applies equally to transferring Franchisees as it does to any new Franchisee. This means that you can only accept non-refundable deposit monies from the incoming Franchisee after more than 14 days from giving the incoming Franchisee an updated copy of the Disclosure Document, the Code and a copy of the Franchise Agreement in the form in which it is to be executed. Allowing the incoming Franchisee to rely on the old documents given by the old Franchisee is not sufficient.

In the case of a transfer of a franchise, the Franchise Agreement may be a completely new agreement, or it may just be a short document to transfer the existing Franchise Agreement – either way, a copy of the document to be executed needs to be provided along with an updated Disclosure Document at least 14 days before the making of a non-refundable payment or the execution of the agreement.

Also that the cooling off period still applies, so any deposit must be refunded (less the Franchisor’s reasonable expenses) if the franchisee terminates the agreement within seven days of signing the agreement or paying the deposit.