Franchise Renewal, Transfer & Exit in Ontario: Notice Periods, Assignment Rights, and the Duty of Fair Dealing

Most of what gets written about Ontario franchise law focuses on the moment of signing: the disclosure document, the mandatory waiting period, and a franchisee's rescission rights if that process goes wrong — we cover that ground in our guide to the Arthur Wishart Act. And most of what gets written for franchisors focuses on building the system in the first place — see our guide to franchising your business in Ontario for that side of it.

This article covers a different stretch of the relationship: the years after signing. A franchise agreement can run five, ten, or twenty years, and a meaningful share of the disputes we see have nothing to do with the disclosure document — they arise when a renewal term approaches, when a franchisee wants to sell, or when a franchisor decides to terminate. The rules that govern that stretch are different from the rules that govern signing day, and franchisees and franchisors alike tend to under-prepare for them.

Nothing in the Arthur Wishart Act gives a franchisee an automatic right to renew a franchise agreement. Whether a franchise renews, and on what terms, is primarily a function of what your specific franchise agreement says — there is no statutory backstop that guarantees a second term. The Act still reaches renewals in two ways: the franchisor's handling of renewal is subject to the duty of fair dealing discussed below, and a renewal or extension is exempt from the Act's disclosure requirement only if the franchised business has operated without interruption and there has been no material change since the agreement, or its last renewal or extension, was entered into.

A typical renewal clause defines a few things: a fixed initial term, a window before that term expires in which the franchisee must give written notice of intent to renew, and a set of conditions attached to exercising that right — no outstanding defaults, completion of any required remodeling or rebranding, and, very often, execution of the franchisor's then-current form of franchise agreement rather than a simple extension of the original one. That last point is the one franchisees most often miss: "renewal" in many systems does not mean continuing on your original terms, it means signing a new agreement that may carry different fees, different territory provisions, or different obligations than the one you started with.

Read your specific renewal clause for three things: the notice deadline — and calendar it well ahead of time, since missing a renewal notice window can forfeit the right entirely — the conditions attached to renewal, and whether the clause promises the same terms or only a right to whatever agreement the franchisor is using with new franchisees at that point.

Franchise agreements typically enumerate specific grounds on which a franchisor can terminate for cause — non-payment of royalties or other fees, an uncured breach of operating or brand standards, insolvency, an unauthorized transfer, or conduct that damages the brand. Many agreements attach a cure period to at least some of these grounds: a defined window in which the franchisee can fix a curable default before termination proceeds.

Non-renewal grounds often overlap with termination grounds but are worth checking separately — an agreement might, for example, allow the franchisor to decline renewal on broader or more discretionary grounds than it needs to terminate mid-term. Where the agreement gives the franchisor real discretion — over renewal, over what counts as a curable breach, over how a default is characterized — that discretion is not exercised in a vacuum. It operates against the backdrop of a statutory duty that applies throughout the life of the relationship, which is the subject of the next section.

Section 3 of the Arthur Wishart Act provides that every franchise agreement imposes on each party a duty of fair dealing in its performance and enforcement. That means the duty runs through the life of the agreement, including renewal, transfer and termination. The duty is reciprocal (it binds franchisors and franchisees alike), it includes the duty to act in good faith and in accordance with reasonable commercial standards, and a party to the agreement has a statutory right of action for damages against another party who breaches it.

What that looks like in practice was illustrated in a 2025 Ontario Superior Court decision involving a vehicle dealership agreement, where BMW Canada accepted that the Act applied: Avante Automobile (2017) Corporation v. BMW Canada Inc., 2025 ONSC 87. Applying the statutory duty of fair dealing, the court found BMW Canada liable — not because it lacked a legitimate basis to act, but because of the manner in which it proceeded: a 10-month extension to complete a required renovation had been granted orally and acknowledged only in emails rather than properly documented, and when BMW Canada ended the relationship, it did not follow the termination procedure in the agreement the parties had continued to operate under, which would have given the dealer an opportunity to cure. The court rejected most of the dealer's damages claims on the evidence, and the one modest amount it would have allowed was more than offset by a credit for $600,000 in deposits the dealer had kept from a failed sale. With no net recoverable damages, the court indicated that the practical order would be dismissal of the action, even though BMW Canada had been found liable.

The lesson generalizes well beyond that industry. A franchisor can have a real, defensible reason to terminate or decline to renew and still breach the duty of fair dealing by skipping its own agreement's process — inadequate notice, undocumented side-arrangements, or ignoring a cure period the agreement actually grants. For franchisees, it cuts the other way too: if you are facing termination or non-renewal, the question is not only whether the franchisor had grounds, but whether it followed the procedure its own agreement requires.

A franchisee's right to sell the business is not automatic or unlimited — like renewal, it is defined and constrained by the franchise agreement. A few provisions are worth checking closely before you count on being able to sell:

• Franchisor consent. Almost every agreement requires the franchisor's prior written consent to any transfer. Some agreements qualify that consent as "not to be unreasonably withheld," and what counts as reasonable is shaped by the agreement's own language and the circumstances. The Act does not set a separate test for transfer consent, but the franchisor's decision remains subject to the statutory duty of fair dealing discussed above.
• Right of first refusal. Many agreements give the franchisor the right to buy the franchise itself, on the same terms a third-party buyer has offered, before the franchisee can complete a sale to that buyer. This is a meaningful practical constraint — a prospective outside buyer may be reluctant to spend time and money on diligence for a deal the franchisor can simply step into.
• Transfer fees. Agreements typically set a transfer or assignment fee to cover the franchisor's cost of vetting and onboarding a new operator. The amount, and what it covers, is entirely contract-specific.
• Buyer qualification and training. An incoming owner usually has to meet the franchisor's then-current standards and complete training, the same as an original franchisee would.
• Whether the seller is actually released. Do not assume a completed transfer ends your obligations. Whether an outgoing franchisee is fully released, or remains contingently liable under a guarantee or indemnity, is a specific point that needs to be negotiated and confirmed in writing — not assumed.

Because renewal, termination, and transfer rights live mainly in your specific agreement, the most useful thing you can do — whether you are about to sign your first franchise agreement or you are ten years into one — is read these provisions with a lawyer before you need them, not after.

At minimum, know the answers to:

• What is the renewal notice deadline, and is it calendared far enough in advance to act on?
• Does renewal carry over your original terms, or does it require signing the franchisor's then-current agreement?
• What triggers termination for cause, and does a cure period apply?
• What does the right of first refusal require, and how much time does it add to a sale process?
• What happens after termination or expiry — de-identification requirements, return of manuals and signage, and any post-term non-competition or non-solicitation covenants, which have their own enforceability limits under Ontario law (the Employment Standards Act ban on non-competes covers employees, not franchisees, so a franchise covenant turns on whether it is reasonable)?
• Do personal guarantees survive a transfer or a termination?

Our franchise law practice reviews franchise agreements at every stage of the relationship, not only before signing — including renewal negotiations, transfer approvals, and disputes over termination. The provisions covered in this article are rarely read closely until they matter, and by then the leverage to negotiate them has usually already passed.