Examining Canada's franchise inventory compliance laws
May 09, 2012
In a recent article for the Globe & Mail, columnist Tony Wilson took a look at the inventory legislation
that governs franchise agreements in Canada.
In short, virtually every Canadian franchise agreement requires the franchisee to purchase all equipment, supplies and inventory from suppliers that have been designated or approved by the franchisor, or the franchisor itself. Buying directly from the franchisor is likely to be cheaper, while purchasing via approved supply channels typically involves a volume rebate or other benefit to make the inventory compliance
rules worth franchisees' while.
"By purchasing inventory at a lower price than a solo operator, the money saved can be passed on to consumers in the form of lower prices," Wilson explains
. "The ability of franchisees to buy equipment, supplies and inventory at a lower cost than they would pay on their own is arguably the glue that holds the franchise system together."
According to Franchiseek Canada, the country has one of the largest franchise industries in the world, second only to the United States.