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Published January 17, 2017
Lawyers are often asked to prepare franchise disclosure documents (“FDDs”) for franchisors prior to a location being secured. Practically speaking, some franchisors do not want to undertake the cost and effort and possible risk of finding and securing a site unless they have a committed franchisee. Franchisors consider franchisees to be committed only once they have signed a franchise agreement or at least paid some initial franchise fee or deposit. While this is a common business scenario, the legal framework is fraught with risk as exemplified by the recent Ontario case, Raibex Canada Ltd. v. ASWR Franchising Corp., 2016 ONSC 5575 (“Raibex”).