Practical Considerations For Dealing With Financially Troubled Canadian Franchisees

At some point or another, most franchisors operating in Canada will have to deal with a franchisee in financial difficulty. This article sets out a non-exhaustive checklist of questions and considerations that will assist the franchisor in formulating the appropriate strategy to address this challenge.

1. Assessing the situation

The first step in addressing the problem is a preliminary assessment of the situation. As part of this analysis, the franchisor should first identify the macro-level problems requiring resolution. These problems can include the failure of the franchisee to pay franchise fees, a "dark" (i.e. abandoned) franchise location, and even bankruptcy or creditor-initiated proceedings against the franchisee.