What to look for in a franchise agreement before you sign

By the team at New Age Spa · Updated 30 August 2026 · Sources checked 30 August 2026

Read it in a different order than it is written

Agreements are organised for the drafter, which usually means the exciting parts come first and the consequential parts come last. Read in this order instead:

1. Term and renewal — how long you have this, and what happens after.
2. Exit — whether and how you can sell or leave.
3. Money — everything payable, for the whole term.
4. Territory — what you actually got.
5. Obligations — theirs as well as yours.
6. Default and termination — what ends this and what happens then.

The reason for that order: the exit clauses determine what everything else is worth. A generous territory in an agreement you cannot transfer is worth less than it looks.

The clause groups

1. Term and renewal

Find the term, then find what renewal actually requires. It is rarely automatic. Look for the conditions attached — being in good standing, signing the then-current agreement rather than this one, a renewal fee, and any obligation to refurbish to the current standard. That last one is a capital event and it belongs in your long-range plan.

2. Exit — transfer, death, and what follows you

Whether you can sell decides whether you are building an asset. Locate the approval process, any transfer fee, whether the buyer must be trained and approved, and whether the franchisor holds a right of first refusal. Then find what happens on death or incapacity, which people skip and families discover.

Finally, find the restrictions that survive the agreement — non-competition and non-solicitation, their duration and their geographic reach. Those define what you may do next.

3. Money, for the full term

List every payment obligation: the initial fee, the royalty, the marketing fund contribution, technology or software fees, anything you must buy through the system, and any minimums. For the royalty, the definition of revenue matters more than the percentage — whether retail and memberships count, whether taxes are excluded, and whether prepaid packages are charged when sold or when redeemed. That is set out in how franchises work.

Also find the audit rights: what the franchisor may inspect, with what notice, and who pays if a discrepancy is found.

4. Territory

Read the definition, not the description. Establish whether it is exclusive or a first right, what channels the franchisor reserves inside it — online sales and corporate accounts especially — whether it can be redefined and on what basis, and whether performance conditions attach to keeping it.

5. What the franchisor is actually obliged to do

This is the half applicants read least carefully. “Support” means nothing unless it is specified. Look for concrete commitments with timeframes: pre-opening support, training and who it covers, ongoing field visits and their frequency, system and protocol updates, and what happens if any of it is not delivered.

6. Control over how you operate

Find what you must do, what you may not do, and — most importantly — who may change the system and how. A clause permitting unilateral changes to the operations manual can effectively amend your obligations without amending the agreement.

7. Default and termination

Establish what counts as a default, whether you get notice and a period to cure it, and what happens on termination: to the equipment, to the lease, to the client records, to the signage and to any outstanding prepaid obligations your clients hold.

8. Disputes

Find the governing law and the forum, whether arbitration is required, where it takes place, who bears costs, and whether any waivers apply. A dispute mechanism that requires you to travel is a real deterrent, which is sometimes the point.

9. Personal guarantees and security

Identify exactly what you are being asked to guarantee personally, and what security is taken over the business or its assets. Decide in advance what you are willing to sign, with your own advisors, rather than at the table.

Two clauses people notice too late

• The renewal refurbishment obligation. Discovered years in, when the money for it was never planned.
• Lease control. If the franchisor holds the head lease and sublets to you, then losing the franchise can mean losing the premises. Read the lease and the franchise agreement together — the interaction is the risk, and neither document shows it alone. The lease side is in choosing a location.

Five questions to bring to your lawyer

1. If I want to sell in year five, what does this agreement require, and what could prevent it?
2. What can the franchisor change unilaterally after I sign?
3. What is my total payment obligation over the full term, including renewal?
4. What exactly happens to my premises, equipment and client records if this ends badly?
5. What am I personally on the hook for, and for how long?

Those five produce more useful advice per hour than “please review this”, because they tell your lawyer what outcome you care about.

“It’s our standard agreement”

That statement is usually true and frequently misunderstood. Standard means it is the form used across the network, which is reasonable — a franchisor cannot run a system on bespoke terms. It does not mean nothing is ever clarified, and it certainly does not mean you should sign without understanding it.

Where the law imposes disclosure obligations, they exist alongside all of this; where it does not — as in Quebec — the reading is entirely on you. That framework is in franchise laws in Canada.

Before you sign

1. Get the complete agreement plus every schedule, exhibit and manual referenced in it.
2. Read it in the order above, marking anything you cannot explain back in your own words.
3. Send your lawyer the five questions with the agreement.
4. Speak to current and former franchisees you selected yourself.
5. Give yourself a waiting period even if none is imposed on the franchisor.
6. Keep every version and schedule, dated.

For the commercial side of the decision, see what a franchise costs and open your own clinic, or buy a franchise?. The Canadian Franchise Association is an orientation point, and Ontario’s Arthur Wishart Act shows what a disclosure regime requires — neither is a substitute for advice on your specific agreement.

Talk to us about a franchise

General information about the kinds of clauses found in franchise agreements. It is not legal advice, it is not a review of any particular agreement, and it does not indicate whether any term is acceptable or enforceable. Franchise legislation differs by province and changes, and the effect of any clause depends on the agreement as a whole and on the applicable law. Retain a lawyer who practises franchise law before signing anything, including preliminary documents. Nothing here is a representation of the financial performance of any New Age Spa location or franchise, and it is not an offer to sell a franchise; where the law requires one, an offer is made only by disclosure document.