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.
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1. Parties: Identification of the franchisor and prospective franchisee
2. Background: Context of the franchise opportunity and purpose of the deposit agreement
3. Definitions: Key terms used throughout the agreement
4. Deposit Amount: Specification of the deposit amount and payment terms
5. Purpose of Deposit: Clear statement of what the deposit is for and how it will be applied
6. Handling of Deposit: Details of how the deposit will be held and managed
7. Conditions for Refund: Circumstances under which the deposit will be refunded
8. Application of Deposit: How the deposit will be applied to the franchise fee if proceeding
9. Representations and Warranties: Basic statements of fact and promises by both parties
10. Term and Termination: Duration of the agreement and termination provisions
11. Governing Law: Specification of applicable Canadian provincial law
12. Entire Agreement: Standard clause confirming this document represents the complete agreement regarding the deposit
1. Interest on Deposit: Terms for any interest earned on the deposit - include if deposit will be held in an interest-bearing account
2. Multiple Location Rights: Include if deposit covers rights to multiple franchise locations
3. Deposit Protection Insurance: Include if the deposit is protected by insurance or third-party guarantee
4. Currency and Exchange Rate: Include if deposit involves international payments or multiple currencies
5. Development Schedule: Include if deposit is tied to specific franchise development milestones
6. Dispute Resolution: Optional detailed dispute resolution procedures - include for larger deposits or complex arrangements
7. Force Majeure: Include if extended deposit holding periods are contemplated
1. Schedule A - Payment Details: Detailed breakdown of deposit amount, payment methods, and banking information
2. Schedule B - Deposit Milestones: Timeline and conditions for deposit handling and application
3. Schedule C - Refund Procedures: Detailed procedures for requesting and processing refunds
4. Appendix 1 - Required Forms: Standard forms for deposit-related requests or notifications
5. Appendix 2 - Franchise Information Summary: Brief overview of the franchise opportunity related to the deposit
6. Appendix 3 - Bank Account Details: Specific details of the trust or escrow account where deposit will be held
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