Franchisors need to think about whether they will allow their franchisees to install ATMs in their business premises.

This seemingly small issue came before the Ontario Superior Court of Justice in a different context when a landlord tried to prevent a tenant from having a cash machine on its premises, claiming that the device was against the permitted business use described in the lease. But the court ruled that the ATM merely facilitated doing business. It did not cause the store to be a “bank”, which would have been prohibited use under the lease.

For franchisors, this means if they want to keep their franchise operators from installing ATMs for whatever reason, then they need to include such a ban in the Franchise Agreement or in the operating manuals. At the same time, in provinces with disclosure requirements, franchisors need to consider whether the prohibition should be included in their disclosure documents as a matter of materiality.

Finally, for franchisors that do not have an issue with ATMs in their stores and are involved in leasing locations, they should ensure that the right to have a cash machine on the premises is at least considered when negotiating leases and subleases.

Reach Sotos LLP lawyer Allan Dick by phone at 416.977.7180 or by email at adjdick@sotosllp.com