Store Resales - Frequently Asked Questions & Requirements

STORE RESALES:
FREQUENTLY ASKED QUESTIONS & REQUIREMENTS

1. What is the Franchisor's role in the resale of a The Great Canadian Bagel franchise location?

All potential franchise candidates must be interviewed and approved as a Franchisee by the Support Office. Once an agreement has been reached with the potential Purchaser, provide the Franchise department with a copy of the Agreement of Purchase and Sale and arrange for an interview. Each candidate will need to complete a full Application Form prior to the interview. (Note: You'll need Adobe Acrobat Reader to view this form, which can be obtained free of charge from Adobe's website.) All transfers are subject to the approval of the Franchisor.

2. Does the Purchaser pay a Franchise Fee?

No, the Purchaser is not required to pay the standard $30,000 Franchise Fee on a re-sale; however, the Purchaser must pay a training fee of $10,000 (plus G.S.T.). This payment must be paid to the Support Office Franchise department prior to commencement of training. This is in addition to the Transfer Fee payable by the selling Franchisee. (This fee is outlined in Section 18.04 c (v) 1,2 of the Franchise Agreement.)

3. Does the new Franchisee assume the existing Franchise Agreement or enter into a new Franchise Agreement?

The new Franchisee enters into a new Franchise Agreement with The Great Canadian Bagel. The expiration date will remain the same as the expiration date of the original agreement.

4. Now that the Support Office has approved the Purchaser, what is the next step?

Once all conditions in the Agreement of Purchase and Sale have been satisfied, the office will prepare a Franchise Agreement for the new Franchisee along with a Sublease and Assignment, assigning the new Franchisee's name to their registered company number, and decide on a training schedule. The Franchise Agreement must be fully executed by the new Franchisee and The Great Canadian Bagel, Ltd., prior to the beginning of training. Both parties will need to provide the names, addresses, and phone numbers of their respective lawyers. You should also have decided on a closing date prior to finalizing the deal. (Please check with the Support Office to ensure training can be completed prior to the closing date being established.)

5. How long is the training for a Franchisee that is taking over an existing store?

The training for re-sale locations is 3 weeks plus 1 day. Orientation is conducted every second Thursday throughout the year beginning at 9:00 am and lasts approximately 2 to 3 hours. Training commences on the Monday following orientation. Until all documentation (as outlined above) is complete, no Franchisees will be permitted into the training program and will have to wait until the next session commences.

6. Does the sale price include the existing store inventory?

This should be outlined in the Agreement of Purchase and Sale. Normally, both parties (Purchaser and Vendor) should count the inventory after close of business on the day prior to take-over. Inventory is typically charged at cost, in addition to the price of the sale.

The following list provides detailed steps which outlines the requirements for the Purchaser:

1. Execute Agreement of Purchase and Sale with a minimum closing date to allow training from the date that the Agreement of Purchase and Sale has been fully signed and all conditions are removed. (Example: If you are signing an Agreement on the 1st of the month, and all conditions need to be removed by the 15th of the same month, then the closing date should be approximately the 20th of the next month.) If this is not possible, advise the Support Office immediately of the circumstances so that we can work to attempt to assist your needs.

2. Pay required deposits under Agreement of Purchase and Sale.

3. Complete Franchise Application and forward it to Support Office for scheduling of interview.

4. Attend at Support Office and obtain approval as a Franchisee.

5. Provde Support Office with a copy of the conditional Agreement of Purchase and Sale as soon as possible after all parties have signed.

6. Arrange your financing.

7. Provide Support Office, for each Purchaser, with an address, telephone number, and if possible a fax number that each Purchaser can be reached at.

8. Provide Support Office with name, address, telephone number, and fax number of your lawyer.

9. Provide Support Office with name, address, telephone number, and fax number of your financial institution.

10. Provide your lawyer with a fully executed copy of the firm Agreement of Purchase and Sale.

11. Provide your lawyer with a copy of your Articles of Incorporation, or in the alternative make immediate arrangements with your lawyer to Incorporate your company (if you are planning to transfer the Franchise Agreement and the Sublease to a corporation).

12. Fulfill any obligations you might have in removing any conditions in the Agreement of Purchase and Sale.

13. Sign Waiver for removal of conditions.

14. Execute Franchise Agreement.

15. Set up Training schedule.

16. Pay training fee in the sum of $10,000 plus G.S.T. to Support Office.

17. Provide Support Office with a firm (all conditions removed), fully executed copy of Agreement of Purchase and Sale, and any amendments or alterations to the agreement; or in the alternative the Waiver making it a firm deal.

18. Obtain copy of fully executed Franchise Agreement from Support Office.

19. Obtain copy of existing Lease/Offer to Lease and any related amendments from Support Office.

20. Provide your lawyer with a copy of your Franchise Agreement, Lease/Offer to Lease and any related amendments, and your banking requirements.

21. Provide Support Office with copy of front page of Articles of Incorporation on or before commencement of training (if Sublease and Franchise Agreement are to be assigned to a corporation).

22. Contact your lawyer to obtain his/her instructions for closing so that you understand what his/her requirements of you will be.

23. Make arrangements with Seller for inventory to be taken on the date of closing; give as much notice as possible and set a specific time of the day to take inventory.

24. Have your lawyer confirm status of lease with lawyer for the Seller and confirm obligations of the Seller have been met with respect to the requirements of the Head Landlord.

25. Conform to any requirements of the Head Landlord.

26. Complete training as required.

27. Have your lawyer advise lawyer for Seller that your training is complete.

28. Attend at your lawyer to sign Sublease, Party with Agreement (if required), Consent for Head Landlord (if required), Tripartite Agreement (if required), Assignment Agreement (if required), Financing documents, and pay any monies due payable on closing to Franchisor and/or Seller.

29. Obtain insurance cover as set out in the Head Lease/ Head Offer to Lease and provide copy to your lawyer.

30. Provide all requirements necessary for Head Landlord to your lawyer.

31. Have you or your lawyer provide copy of insurance coverage to Support Office.

32. Provide Support Office with Resolution of Board of Directors (if transferred to a Corporation--your lawyer will know which document this is).

33. Provide Support Office with a Certificate of Incumbency (if transferred to a Corporation the
Franchisee(s) must be the sole shareholder(s) of the Corporation-- your lawyer will know what this document is).

34. Confirm with your lawyer all requirements of Head Landlord, The Great Canadian Bagel, Ltd. as Franchisor, and Seller, have or will be complied with on or before closing.

35. Have your solicitor deliver by courier to Support Office all original documents that were signed for closing and any monies due to the Franchisor.

SUPPORT OFFICE CONTACT:

Main Telephone Number: (905) 566-1903
Main Fax Number: (905) 566-1402

To Obtain:
Direct Contact:

Franchise Approval; Interview Appointment; Training Schedule; Franchise Agreement; Payment of Training Fee

Ed Kwiatkowski
Voice/Fax
(905) 803-7781

Sublease; Assignment to Corporate Company; Paralegal/Lawyer Contact Person

Marian Beals
(416) 207-4471
Alternate:
(905) 432-7997
Fax:
(905) 432-2667

SALE OR PURCHASE OF A BUSINESS

Section 13 of the Act provides for unique consequences in the event of the sale of a business. These consequences are created by the definition of the term "sale" used for the purposes of the legislation. In order to avoid legal jargon, the term "sale" can include: the sale of all or part of a business sold as a going concern; the transfer of assets of a business; the lease of all or part of a business; and many other forms of disposition of a business or assets comprising part of a business. In certain circumstances, the purchase of assets of a business through a trustee or receiver can also be caught by the definition. In one case, the transfer of 1/10 of the assets of a business was found to be the sale of a business for the purposes of the Act. For these reasons, and those that follow, a prospective purchaser of a business, and even the vendor, should defer to legal counsel to assess the possible impact of this definition prior to closing a transaction.

Where a purchaser buys a business within the meaning of the term "sale" and the purchaser continues to employ the vendor's employees, the statute operates so that those employees are deemed to enjoy continuity of employment for the purposes of vacation pay, public holidays, pregnancy and parental leave, notice of termination and severance pay. In these circumstances, service with the vendor is deemed to be service with the purchaser and such employees are deemed not to have been terminated by the event of the sale of the business, even to a new employer.

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