What franchisees need to know about Canadian laws

Posted on July 31, 2010 by Franchise Gator Admin

When it comes to Canadians buying franchises from American companies, there are a few things that they need to know.

Writing for CTV.ca, Tony Wilson says that Canadian franchisees need to take steps to make sure they do not violate long-standing laws that govern business in the country. The first thing they need to do is make sure that the franchisor understands the 10-percent withholding tax applied on all royalties which come over the border from the United States to Canada. If the company is not accustomed to doing business in Canada, it may not have taken this into account.

Wilson goes on to explain that the tax structure can vary depending on the franchise agreement.

"Royalties may be between 5 percent and 10 percent of a franchisee’s 'gross sales' (that is, the total sales made by a franchisee in the businesses, net of GST, PST, HST and refunds) and they are payable monthly or weekly, depending on the agreement," he writes. "Royalties can also be expressed as a fixed amount rather than a percentage of sales."

Many companies find it advantageous to cross the border to Canada.Franchisees often find success when taking a concept from the United States to a whole new market.