Franchise Conditions in Ontario Commercial Deals: What You Cannot Waive

Last updated 11 September 2026. Written by Jatin Dua, Broker of Record at RE/MAX Quantum Realty, 799 The Queensway, Etobicoke · For Ontario registrants · 9 min read

The waiver that does nothing

A buyer loves the business. The franchisor’s approval process is dragging and the deadline in the agreement is tomorrow. Someone suggests waiving the franchise condition so the deal goes firm and everyone can relax. The buyer signs a waiver, the seller’s agent accepts it, and both brokerages file it as a firm deal.

It is not a firm deal. FRANCH-2 is a true condition precedent, which means it depends on the act of a third party who is not bound by the agreement and has no obligation to anyone in it. The buyer cannot waive it because it was never there for the buyer’s sole benefit — and neither can the seller. If the franchisor declines the transferee, the offer becomes null and void whatever paper the parties exchanged in the meantime.

That is the entire reason this post exists. On a commercial trade where the business is the asset and the franchise is the business, an agent who does not know which of their conditions can be waived is guessing with somebody’s livelihood.

What each clause is actually for

FRANCH-1 is a due diligence condition. It gives the buyer a window, at the buyer’s own cost, to read whatever agreements and contracts bind the seller to the franchisor and to decide whether those terms work — a satisfaction test framed as the buyer’s sole and absolute discretion. It also puts a positive obligation on the seller to hand the documents over within a stated number of days of acceptance. It behaves like any other buyer satisfaction condition: notice in writing by the deadline that it is fulfilled, or the offer ends and the deposit is to be returned.

FRANCH-2 is not a due diligence condition at all. It is a gate. The offer is conditional on the franchisor approving the buyer for the purchase and for assuming the agreements with the seller. No amount of enthusiasm on either side substitutes for that approval.

They are not alternatives. On almost any franchised business you want both, because they answer different questions. FRANCH-1 answers whether your buyer wants this franchise on these terms. FRANCH-2 answers whether the franchisor will have your buyer at all. A buyer who reads the documents, approves them and waives FRANCH-1 still needs to get through the franchisor.

True conditions precedent, and why they behave differently

The concept is old and the leading authority is Turney v. Zhilka, decided by the Supreme Court of Canada in 1959. Where the performance of an agreement is made to depend on the act of a third party — a public authority, a lender, a landlord, a franchisor — neither of the contracting parties can unilaterally give up the requirement, because the condition was never a benefit conferred on one of them to abandon. The event either happens or it does not.

You will see the same structure in other categories. LAND/LSE-1 (Condition — Land Lease — Landlord’s Approval) works exactly this way, and I have set it out in more detail in the post on land lease clauses. Once you learn to recognize the shape, you stop trying to waive things that cannot be waived.

How far the doctrine reaches in any particular agreement is contested territory, and the answer in a real dispute depends on the wording the parties actually used. That is a question for the client’s lawyer, not for you or for me. What is not contested is the practical instruction: do not tell a client a franchisor approval condition can be waived.

The timing problem nobody prices in

Franchisor transfer processes are slow, and they are slow in ways that have nothing to do with your client. A typical transfer involves an application, financial disclosure, a credit review, an interview, a training commitment, sometimes a renovation or re-imaging requirement attached to the transfer, and a legal department that works through a queue. Thirty days is optimistic. Sixty is common. Some systems will not even start until the seller formally gives notice of intention to transfer.

Now compare that to the condition period an agent typically writes, which is borrowed from residential habit and lands somewhere around ten to fifteen days. The period expires long before the franchisor has finished, and the parties then spend the rest of the deal signing extensions — each one an opportunity for a seller with a better offer in hand to decline.

So do the thing nobody does. Before the offer goes in, call the franchisor’s transfer or development contact and ask how long approvals are currently taking and what the applicant has to submit. Ask the seller, in writing, whether they have given the franchisor notice. Then write a condition period that reflects the answer. The same discipline applies to the FRANCH-1 side: the period should be long enough for the seller to actually produce the documents and for a franchise lawyer to read them, not long enough only for the courier.

Notice, service and the deadline

Both clauses call for written notice served on the seller personally, or by whatever other delivery method the agreement and its schedules allow. Commercial agreements frequently carry negotiated notice provisions that differ from anything you are used to on a residential form, because a lawyer drafted the schedule. Read them before the condition period starts.

In High Tower Homes Corp. v. Stevens, 2014 ONCA 911, as reported, a waiver was delivered by fax where the agreement required personal delivery, and it was ineffective — the notice clause governs even where the other side plainly received and understood the document. On the other side of the ledger, in VanderMolen Homes Inc. v. Mani, 2025 ONCA 45, as reported, a late acceptance of an extension did not end a deal that the parties’ subsequent conduct kept alive. Neither case gives you permission to be casual. They tell you the outcome turns on facts you should not be generating.

There is one detail specific to FRANCH-2 worth flagging. The clause contemplates the buyer giving notice that the condition is fulfilled. In practice fulfilment means the franchisor has approved, so your buyer should not be sending that notice until they are holding something in writing from the franchisor. A verbal from a regional manager is not an approval, and if the deal later comes apart your file will be asked what your buyer relied on.

What happens to the deposit

When the condition is not fulfilled, the agreement ends. The money does not move with it. A brokerage may disburse a deposit only on a written direction signed by all parties to the agreement, or on a court order. There is no third route, the brokerage has no discretion, and the fact that everyone agrees the buyer is entitled to it changes nothing until the direction is signed.

On a commercial deal this matters more than on a house, because deposits are larger and the parties are often corporations with signing officers who are travelling. Start collecting the signatures the day the condition fails, not the week your buyer finally asks where the money went. If you want the mechanics in full, the post on deposit clauses covers the contractual and regulatory clocks separately, which is where most of the confusion lives.

Your exposure as the registrant

Commercial franchise trades are where the gap between what an agent knows and what an agent is prepared to say out loud gets dangerous. Franchise law is a specialty. Whether a franchisor owes anything to your buyer on a transfer, what a transfer fee can properly cover, and what happens to the seller’s continuing obligations under the franchise agreement are legal questions, and you should be routing them to counsel who does franchise work rather than to the lawyer who did your client’s house.

Two duties under TRESA sit directly on this file. Competence — taking on a franchised business trade when you have never read a franchise agreement is a choice you are making about your own file, and your brokerage should be involved in it. And if the seller of the business is self-represented, which is common when an owner-operator sells directly, you must not advise them on price, terms or clauses, and your brokerage must not agree with a self-represented seller to provide assistance or to charge or collect remuneration. That last point catches people who think a reduced role is a safe middle ground. It is not a middle ground. It is prohibited.

Where remuneration is being dealt with inside the agreement itself, RECO’s guidance on remuneration clauses in an agreement of purchase and sale sets out five components that need to be covered: who the parties are, what the payment is for, the amount and whether taxes are included, when it is payable, and who pays whom. Vague commercial remuneration language is a recurring source of complaints, and vagueness is easy to avoid.

How to run the file

1. Confirm with the seller, in writing, exactly which agreements exist with the franchisor — a franchise agreement is often not the only one. There may be a lease or sublease from the franchisor, an equipment lease, a supply agreement and a development agreement.
2. Call the franchisor’s transfer contact before drafting and ask what the process requires and how long it is currently taking.
3. Use both FRANCH-1 and FRANCH-2 unless there is a specific reason not to, and give each a period that matches its own process.
4. Have the buyer start the franchisor application immediately on acceptance. FRANCH-2 does not oblige the buyer to be quick, so make it a diarized task rather than a hope.
5. Route the franchise documents to a lawyer who does franchise work, and diarize a check-in well before the FRANCH-1 deadline.
6. Never send a waiver on FRANCH-2. If time is short, sign an extension.
7. When a condition fails, start collecting signatures on a written direction for the deposit the same day.

None of this is difficult. It is just unfamiliar, which is why so many franchised business deals in this province are held together by an extension signed at the last minute by people who do not know what they are extending.

Questions agents actually ask

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• Every clause and condition guide in one place

This is professional commentary from a Broker of Record on drafting practice in franchised business transactions, not legal advice. Franchise agreements, transfer obligations and the enforceability of any condition are matters for a lawyer who practises franchise law. This is general professional commentary from a Broker of Record on drafting practice. It is not legal advice, it is not a substitute for your own brokerage’s policies, and it does not create any professional relationship. Clause codes refer to OREA’s Guidelines for Residential and Commercial Clauses, an OREA member resource — the clause wording itself is OREA’s and is not reproduced here. Always work from your brokerage’s approved forms, and send your client to a lawyer for anything turning on interpretation, enforceability or remedy. Legislation, regulator guidance and case law all change; verify anything you are relying on.