KEEPING YOUR SALES PEOPLE IN LINE

1. KEEPING YOUR SALES PEOPLE IN LINE ENSURING LEGAL COMPLIANCE IN THE FRANCHISE SALES PROCESS

2. Jordan Druxerman Partner Garfinkle Biderman LLP 416.869.7628 jdruxerman@garfinkle.com Shawn Saraga Founder The Franchise Academy Senior V.P. / Broker of Record SRS Canada 416.712.5526 shawn.saraga@franchiseacademy.ca

3. Agenda • This presentation will cover best practices for franchisors to ensure that their sales processes, and sales representatives, are not putting the franchisors offside of franchise disclosure laws. • This presentation will also explore the application of the Real Estate and Business Brokers Act to franchisors’ sales representatives.

4. Real Estate and Business Brokers Act • The Act is legislation designed to protect the public by regulating those engaged in the real estate business, including the sale or purchase of franchises. Its purpose is consumer protection and meant to ensure that parties in arms-length real estate transactions receive competitive pricing and are protected from dishonest sales agents.

5. Real Estate and Business Brokers Act • “Brokerage” means a corporation, partnership, sole proprietor, association or other organization or entity that, on behalf of others and for compensation or reward, or the expectation of such, trades in real estate or holds himself, herself or itself out as such.

6. Real Estate and Business Brokers Act • “Broker”: means an individual who has the prescribed qualifications to be registered as a broker under this Act and who is employed by a brokerage to trade in real estate. • “Salesperson” means an individual who has the prescribed qualifications to be registered as a salesperson under this Act and who is employed by a brokerage to trade in real estate.

7. Real Estate and Business Brokers Act • “Trade” includes a disposition or acquisition of or transaction in real estate by sale, purchase, agreement for purchase and sale, exchange, option, lease, rental or otherwise and any offer or attempt to list real estate for the purpose of such a disposition, acquisition or transaction, and any act, advertisement, conduct or negotiation, directly or indirectly, in furtherance of any disposition, acquisition, transaction, offer or attempt.

8. Real Estate and Business Brokers Act • “Real Estate” includes leasehold interests and businesses, whether with or without premises, and fixtures, stock-in-trade and goods connected with the operation of a business. • “Business” means an undertaking carried on for gain or profit and includes any interest in such undertaking.

9. Real Estate and Business Brokers Act • By requiring that brokerages, brokers and salespersons be registered, Section 4 of the Act regulates people who act for another person in connection with a trade in real estate.

10. Real Estate and Business Brokers Act • Exemptions: • Non-arms length transactions; • Dealing on your own behalf; • The broker/sales agent is a salaried, full time employee of a party to the transaction. Note: case-law has interpreted ‘employee’ narrowly as to not include consultants; • The sale involves solely a licence or franchise agreement.

11. Real Estate and Business Brokers Act • Section 19 of the Act allows a person to complain to Real Estate Council of Ontario (RECO) about a registrant. RECO may resolve the complaint, warn the registrant to stop the activity complained of, require the registrant to take educational courses, refer the matter to the discipline committee or suspend the registrant’s registration. • Section 20 of the Act allows RECO to inspect a registrant’s business premises to ensure compliance with the Act or deal with a complaint. • Section 21 of the Act allows the discipline committee to require a registrant to take educational courses or fine the registrant up to $50,000. • Section 25 of the Act allows the director to impose freeze orders on both registrants and non-registrants to prevent them from withdrawing any assets from a person’s deposit or to hold any assets in trust for the person entitled to the assets.

12. Real Estate and Business Brokers Act • Section 9 of the Act previously prohibited non-registrants from being an action for the collection of commissions. • This section has recently been revoked.

13. Arthur Wishart Act • Franchisor’s Broker: • a person other than the franchisor, franchisor’s associate, franchisor’s agent or franchisee, who grants, markets or otherwise offers to grant a franchise, or who arranges for the grant of a franchise • Liable for damages on a Section 7 claim for misrepresentations or deficient disclosure

14. Arthur Wishart Act Franchisor’s Associate is a person, (a) who, directly or indirectly controls or is controlled by the franchisor,and (b) who is directly involved in the grant of the franchise, (A) by being involved in reviewing or approving the grant of the franchise, or (B) by making representations to the prospective franchisee on behalf of the franchisor for the purpose of granting the franchise, marketing the franchise or otherwise offering to grant the franchise

15. Arthur Wishart Act • Attention should be given to salespeople that meet the test for ‘Associates’. • Note that FDD’s may be deficient for the failure to include certain information on Franchisor’s Associates.

16. Franchise Sales Process Goal: • More transactions • Less risk Achieved through a 9-step sales process

17. 9 Step Sales Process • Personality and Financial Assessment • Start on the path to determining which business may be best suited for you! Have a one-on-one phone interview with one of our experts, followed be an online personality assessment. From there, we have a one-on-one meeting with you to review the assessment in person and conduct a personal evaluation.

18. 9 Step Sales Process • Evaluating Concepts • The Franchise Academy represents the franchise industry, not just one brand. Choose form hundreds of concepts ranging from Restaurants, Gyms, Health Care, Beauty Industry, Home Based Trades and Education. After reviewing all of your options we will follow up with a shortlist for you to begin your due diligence.

19. 9 Step Sales Process • Review the Agreements • Our consultants will help you become franchise savvy and learn to ask the right questions. Our expert staff can educate you about the business, franchise agreements, leasing, and more. We will review the franchise and disclosure agreements of your top 5 brands and get a better understanding of their Return on Investment.

20. 9 Step Sales Process • Validation Tour • Walk before you run. Meet with other operators, take a tour, and discover first-hand what it’s like to be in the business you are considering. Find the answers you need to help your financial and non-financial goals.

21. 9 Step Sales Process • Meet the Franchisor • Be fully prepared for our Executive interview with the Franchisor. Come equipped with knowledge of their system, franchisees and business model. This meeting is for a mutual approval and is a great step toward further evaluation. You may choose to enter a deposit or franchise agreement with a Franchisor to proceed.

22. 9 Step Sales Process • Location, Location, Location • Find the right location for you and your business! One of our affiliates will work you to use our location intelligence and 100-pont site selection tools to find the best site for your specific business.

23. 9 Step Sales Process • Lease and Build Out Negotiation • Negotiate the best possible lease by using competitive information to determine the real market rates while leveraging our deep landlord relationships. Cost out the build out expense and verify the final numbers for construction. We help confirm timing for the build out and ensure it aligns with the lease dates.

24. 9 Step Sales Process • Business Plan and Financing • Build a better business plan by using one of our affiliate business plan writers. They will ensure the return you are looking for is achievable and that the financing you need is there for your business.

25. 9 Step Sales Process • Sign Agreements and Open for Business • Finalize your paperwork and get ready to open your business, after your independent legal counsel, accountants and other professionals have reviewed the leasing and business agreements. Our team will help you finalize your paperwork and organize start dates for training and a schedule for your grand opening celebration!

26. 9 Step Sales Process Advantages: • Legally able to trade in real estate • Is not a Franchisor’s Associate: • Is not retained by, or controlled by, the franchisor; • Does not make any representations on behalf of the franchisor; • Is not involved in the grant of the franchise or the approval of the franchisee; • Does not approve the grant of the franchise to the franchisee.