Do Franchisees Have to Take Part in a Franchisor's Promos?

Marketing is a crucial part of any Canadian franchise system, and it's just as important to franchisors as it is to franchisees. As a new franchisee, you will want to know what promotional programs your franchisor has in place and how they will impact your bottom line because it's likely you will have to take part in all of them. Therefore, it's vital to learn about these programs by speaking to current franchisees and reviewing the disclosure document you received from the franchisor.

Not participating, even if you believe the program is terrible, tends to carry a lot of downsides. You could suffer reputation damage and loss of customer goodwill, since even when a campaign states "at participating locations," people usually assume it's available at every single location. When they show up to yours and don't see the advertised offer, they're going to leave unhappy.

On top of that, not taking part in a promo could be a breach of the franchise agreement you signed. Many franchise agreements state franchisees have to cooperate with and participate in that franchisor's local, regional and national sales promotions and ad campaigns. The franchise agreement may also fully set out what this will include, such as discounts, and who is responsible for any costs associated with these promotions.

Last but certainly not least, there are laws in Canada that focus on preventing misleading ads. Not honoring advertised offers or trying to make additional money off of services that were advertised as free can leave both the franchisor and franchisee open to liability. The Competition Act, for example, makes it illegal for anyone to recklessly or knowingly make a representation to the public that is substantially false or misleading. There are civil penalties in the act as well, which can require paying penalties and restitution to affected customers.

In addition to the county-wide Competition Act, many provinces have their own customer protection laws in place. In Ontario, for example, making deceptive, misleading or false representations to the public can result in damages owed to the customer.

A franchise system is essentially built around its brand, and everyone in that system will thrive when brand recognition is both favorable and strong. The value of your ad dollars can disappear quickly when promises made in promotions are not honored, so you need to really consider the promo programs your franchisor uses before you join their system.