Buying a Daycare in Ontario

Buying a daycare in Ontario means acquiring a business whose revenue depends on permission to operate, an appropriate site, a qualified team and families who choose to stay. A full enrolment list does not establish that a buyer can run the same program, receive the same public funding or keep every room open after closing.

For a licensed child care centre, start by identifying the legal entity holding the Ministry of Education licence and whether the proposed transaction changes that entity. Then investigate Canada-wide Early Learning and Child Care (CWELCC) participation separately. Those two questions can determine whether the proposed closing date and financial forecast are workable.

This guide addresses centre acquisitions; a home child care agency requires a different operational review. Use the broader Ontario business purchase checklist alongside the centre-specific requests below. This is general information; obtain legal, accounting and operational advice for the particular transaction.

For the broader purchase process and other sectors, visit the business acquisition hub and industry guide directory.

Ontario's child care licence is not transferable. The Ministry's guidance on asset and share sales distinguishes a change in the operating legal entity from a sale of shares in the existing corporate licensee. An asset purchase that puts a new entity in charge requires that entity to obtain a new licence. A share purchase does not require a new licence solely because the shares change hands: the corporation remains the licensee. The current licensee must still contact its program advisor about the share transaction.

Ask the seller for the licence, accompanying licensing letter, conditions, expiry information, inspection reports and outstanding compliance correspondence. Confirm that the seller named in the transaction documents actually controls the licensed business and relevant assets.

In an asset deal, make the required new licence a closing condition and map the application process with the program advisor. The seller's cooperation should include access for inspections and responsibility for correcting identified deficiencies. Do not assume the buyer can operate temporarily under the seller's licence.

In a share deal, investigate the corporation's history and obligations as well as the licence. The asset versus share sale comparison tool can help frame the commercial choice, but licensing convenience should not decide it alone.

A licence and a funding agreement answer different questions. When the operating legal entity changes, the new entity must apply to its service system manager if it wants to enrol in CWELCC. Do not price the purchase on the assumption that the seller's funding follows the furniture, enrolment or trade name.

Ontario's CWELCC licensing guidance describes a local application process, eligibility assessment and service agreement. Obtain the applicable manager's written position on the proposed structure and planned program. In a share purchase, review the existing agreement for notice, consent and change-of-control requirements rather than treating corporate continuity as funding approval.

Request current funding agreements, amendments, budgets, payment statements, reconciliations, audit findings and correspondence about recoveries. Separate CWELCC receipts from fee subsidy payments and other grants so that different obligations are visible.

The financial model should show what happens if funding starts later than expected or particular amounts are unavailable. Allocate responsibility for pre-closing reporting and repayment claims, including claims identified after closing. An agreement between buyer and seller does not bind the funding authority.

Build an enrolment schedule by room and age group, showing actual attendance, contracted days, fees, subsidies, upcoming withdrawals and expected transitions to older groups. A waitlist is evidence of interest, not contracted revenue. Ask how recently families confirmed their interest and whether places have been offered elsewhere.

Review the parent agreement and handbook together. Compare written terms with the centre's actual approach to holidays, absences, withdrawals, refunds, fee changes and late collection. Identify assignment or consent issues and decide how families will receive any new agreement. Avoid promising that every family must remain after a sale.

Reconcile deposits, advance fees, credits and disputed balances to bank and accounting records. If the buyer must honour a deposit already collected by the seller, the closing adjustment should provide the corresponding economic credit. Otherwise the buyer may supply care without receiving the cash that funded it.

Check reserved future spaces, sibling commitments and special arrangements recorded in emails. Use the interactive due diligence checklist to track unresolved requests, while limiting access to identifiable child and family information during diligence.

Buyers comparing service businesses can also explore the home care business guide for care-service contracts and the gym purchase guide for prepaid customer commitments. These comparisons help frame the questions; the daycare licensing review remains specific to the centre.

Payroll percentages alone cannot establish whether a staffing plan works. Ontario's ratio and group-size guidance addresses staffing by age group. Reduced ratios are limited to permitted periods and conditions; they are not allowed for infant groups or during outdoor play. They should not become the assumed staffing level throughout the day. Compare actual attendance with schedules covering opening, meals, breaks, outdoor time and closing.

The Ministry's staff qualification guidance explains that supervisors require director approval. An RECE's registration does not replace director approval to act as the centre's supervisor. For other qualified educator positions, RECE registration in good standing is a qualification route, while certain alternatives need director approval. Obtain current credential checks, approval letters and their conditions; ask the program advisor what the proposed ownership structure means for existing approvals.

Request an employee roster with compensation, service dates, vacation balances, leaves, benefits and employment agreements. Identify who provides relief when a supervisor or educator is absent and whether the owner regularly fills unpaid shifts. Replacing that work can materially change earnings.

Speak with key staff through an agreed process before relying on retention. Budget for realistic recruitment, substitute coverage and any proposed retention payments. Have employment counsel assess the obligations associated with retaining, replacing or terminating staff, and reflect the resulting costs in the transaction.

The purchase must include dependable rights to the spaces that make the licensed program possible. Inspect the lease, all amendments, approved plans and any separate playground or shared-space agreement. Confirm assignment or change-of-control consents, renewal options, permitted use, repair responsibilities and the remaining term against the financing plan.

The Ministry's building and playground guidance addresses room suitability, plan approvals and outdoor arrangements. Requirements can depend on program duration, age group and approved alternatives. Obtain the actual approvals rather than assuming that a neighbouring park or informally shared yard satisfies this centre's requirements.

Walk the property with an appropriate building professional. Review fencing, gates, sightlines, drainage, surfacing, washrooms, food preparation areas and heating or cooling equipment. Request playground inspection reports, repair logs and evidence that deficiencies were addressed.

Ask the landlord about redevelopment, major works and restrictions on drop-off access or outdoor use. A useful room is worth less if its playground rights expire first. Address these issues during commercial lease negotiations, before the business purchase becomes unconditional.

Reconcile monthly revenue to enrolment, parent billing, funding statements and bank deposits. Investigate differences between licensed capacity, enrolled children, daily attendance and the number of spaces the existing team can actually support. An empty room may require additional hiring and spending before it generates revenue.

Review food, cleaning, insurance, maintenance and substitute staffing costs over a meaningful period. Identify deferred repairs and equipment replacement, particularly playground work, kitchen equipment, laundry and security systems. Separate genuine discretionary owner expenses from costs a purchaser will have to replace.

Prepare a closing balance schedule covering parent deposits, prepaid care, accounts receivable, supplier balances, accrued payroll and funding adjustments. Specify which items are included in price, adjusted separately or retained by the seller. Check ownership and financing of vehicles, furnishings and equipment rather than relying on their presence at the centre.

For a share purchase, extend the investigation to corporate records, tax compliance, guarantees, debt and historical claims. In an asset purchase, carefully define assumed obligations and obtain releases where needed. Contractual exclusions do not determine every obligation that a regulator, employee or other third party may assert.

Ask for the history behind the latest inspection result: complaints, serious occurrences, corrective action plans, insurance claims and unresolved communications. Seek enough information to understand patterns and outstanding work without circulating unnecessary personal details. A problem described as resolved should have supporting records.

Review the systems used for attendance, authorized pickup, allergy information, medication, incident reporting and parent communications. Establish who owns the accounts, who has administrator access and how records will remain available during transition. Confirm with counsel the lawful handling of sensitive child, family and employee information.

The purchase agreement should contain specific disclosure obligations and representations addressing licensing correspondence, funding agreements, deposits and undisclosed commitments. Consider a holdback or other security for a measurable unresolved exposure, with clear release mechanics and claims procedures.

Use what to include in a purchase letter of intent to identify essential conditions early. Licensing, funding, landlord consent and key staff arrangements should have realistic milestones, cooperation duties and an outside date. Avoid a closing obligation that survives even when the buyer cannot lawfully operate the intended centre.

Suppose a buyer agrees to purchase a centre's assets after seeing stable attendance and funding receipts. The forecast assumes the seller's parent fees and CWELCC payments will continue immediately. The buyer also expects the outgoing owner to stop working on closing day.

Diligence reveals three separate issues: the buyer's new corporation needs its own licence, its CWELCC application remains unresolved, and the owner provides regular room coverage that the payroll report does not capture. The business may still be attractive, but its proposed opening budget and closing date are unsupported.

A practical response is to obtain the program advisor's application requirements, seek the service system manager's written position and price replacement staffing. The parties can then revise conditions, transition arrangements and financing assumptions. If an acceptable operating and funding plan cannot be established, the buyer needs the contractual ability to avoid closing. A seller's reassurance that nothing will change is not a substitute for those confirmations.

Create a closing checklist that connects documents to operating tasks. Confirm the required licence position, funding arrangements, landlord consents, insurance, staffing and access to approved premises. Reconcile the final parent deposit and prepaid fee schedule immediately before closing, including changes since diligence.

Agree who communicates with families and staff, when communications occur and who answers questions about fees, programming and management. Keep messages consistent with confirmed approvals and signed terms. Identify responsibility for children arriving on the first morning, meal delivery, relief coverage and emergency contacts.

Test access to billing, payroll, attendance and communication systems. Arrange a controlled handover of keys, access codes and administrator permissions, with appropriate protection for records. Obtain necessary supplier consents and update payment instructions through a verified process.

A seller transition agreement should specify hours, tasks, availability and boundaries. Pay particular attention where the seller is also the supervisor or landlord. Document who completes outstanding funding reconciliations and who responds to historical complaints after closing. A general promise to help for a few weeks leaves too much unresolved.

Can I buy a daycare without transferring its licence?

The licence itself cannot be transferred. An asset purchase involving a new operating entity requires a new licence. Buying shares of the existing corporate licensee leaves that entity in place, so the share sale alone does not require a new licence. Contact with the program advisor remains necessary.

Does a CWELCC centre keep its funding after a sale?

Do not assume it does. A new operating entity must apply to the service system manager. In a share transaction, investigate the existing funding agreement and obtain confirmation about required notices, consents and continuing participation.

Who gets the parent deposits?

The agreement should identify every deposit and who must honour or refund it. Reconcile the schedule and provide an appropriate closing adjustment where the buyer takes on the obligation. Resolve differences before funds are released.

A sound daycare purchase connects price to an achievable operating plan: the right licensee, confirmed funding arrangements, secure premises, sufficient staff and accurate parent balances. Address those dependencies while negotiating the deal, when conditions and remedies can still be designed around them.

Lamba Law provides legal help with buying a business, including transaction structure, diligence, leases and purchase agreements. Contact Lamba Law to discuss the legal work for your proposed Ontario daycare acquisition.