Document background
The Franchise Deposit Agreement serves as a crucial preliminary document in the Canadian franchise acquisition process, typically used when a prospective franchisee expresses serious interest in purchasing a franchise by providing a deposit. This agreement must comply with provincial franchise legislation, which varies by jurisdiction but generally includes strict disclosure requirements and deposit handling regulations. The document outlines key terms including deposit amount, holding arrangements, conditions for refund or forfeiture, and application toward the franchise fee. It protects both parties by clearly defining their rights and obligations regarding the deposit while ensuring compliance with applicable provincial laws and regulations. The agreement is particularly important in situations where significant time may pass between the initial deposit and the execution of the final franchise agreement, or where the franchisor requires a substantial deposit to secure territorial rights or demonstrate financial commitment.
