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Mr. Claude J. Pellan,
L.L.B., B.Comm., Attorney

(450) 674-5551

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125 St-Charles West J4H 1C7

QUEBEC

1305 Lebourgneuf Blvd., Suite 304 G2K 2E4

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Exporting a Franchise Concept Outside Quebec-The Professional Fees

                            NOVEMBER 30th, 2007

QUESTION CORNER

Question from a Franchiser (Quebec):  Last week, you compared the laws of Quebec and Ontario in the context of a franchisor exporting a franchise concept into another province.   For a franchise network in Quebec that wishes to do the same thing, what are the legal implications (in time and investment)?

Answer: To answer your question, an important distinction needs to be  made to draw a complete picture for a Quebec franchisor that wishes to export a franchise concept to another province.

In fact, there are provinces that have laws governing franchising (Alberta, Ontario, PEI and New Brunswick) that require franchisors to provide eventual franchisees with a Disclosure Document and there are provinces where the general commercial laws (obligations) govern the relationship between a franchisor and a franchisee.

In the event a franchisor from Quebec wishes to export a franchise concept to a province where there exists a law governing franchising (Ontario, Alberta, PEI and New Brunswick), the franchisor has to have his franchise agreement and other franchise documents and forms reviewed and translated into English, if it’s not already done for Quebec. The franchisor must also have a Disclosure Document prepared, the contents of which are determined by the laws in the province where the franchisor wishes to export his franchise concept. The franchisor also has to have a General Security Agreement prepared, notwithstanding the province he wishes to develop his franchise concept in. (It replaces what is called a Moveable Hypothec in Quebec).

In the event a franchisor from Quebec wishes to export a franchise concept to a province where there are no specific laws governing franchising, the legal work to be undertaken is the review and translation into English of the franchise agreement and other franchise documents and forms. Again, only if is hasn’t already been done for Quebec.  As mentioned above, no matter which province a franchisor wishes to export to, a General Security Agreement has to be prepared.

Consequently, in general, it takes more time and a larger investment in professional services for a franchisor from Quebec to export a franchise concept to another province (as opposed to a franchisor that wishes to export his franchise concept to Quebec), especially when there exists a law governing franchising in the province.

Having said that, there are professional services in Quebec that can do all the work required (translation, agreements, etc.) to assist a Quebec franchisor wishing to export his franchise concept to another province and it may be done at a lower cost. The paperwork can be reviewed by an attorney from the province(s) concerned.  This is the least time consuming and least expensive way for a Quebec franchisor wishing to export his concept to another province.

However, as I mentioned in Question Corner last week, the investment in time and money for professional services necessary to export a franchise concept to another province represents a very small amount of the total investment that a franchisor will make when exporting his franchise concept to another province (cost of labour, rent, building and operating a store, publicity, accountants, etc.)

QUESTION CORNER:  I have been asked and have graciously accepted to be a columnist (to replace Jean H. Gagnon) for the Quebec Franchise (Quebec-Franchise.qc.ca and www.quedition.com) and Canadian Opportunities magazines.  Therefore, Question Corner will be published once every two (2) weeks, instead of weekly.



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