Brand Licence or Franchise in Ontario?

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Why the label does not decide it

Many business owners want to let another business use their name, logo or know-how without building a franchise system, with its disclosure documents and the duties that come with them. A brand or intellectual property licence can do that. But Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 (the Act) looks at the substance of the relationship, not the title on the agreement. If the arrangement meets the Act’s definition of a franchise and no exclusion applies, the Act applies whatever the document is called, and a franchisee cannot waive its rights under the Act (section 11). We prepare both kinds of agreement: see licensing on our corporate law page. Franchise work is described under franchising.

The definition in section 1(1) has two branches. Both start with the same element: the franchisee is required, by contract or otherwise, to make a payment or continuing payments, directly or indirectly, or commit to make them, to the franchisor or its associate, in the course of operating the business or as a condition of acquiring it or starting operations. Then:

The brand branch (clause (a)). The franchisor grants the right to sell or distribute goods or services substantially associated with a trademark, trade name, logo or other commercial symbol owned by or licensed to the franchisor, and the franchisor has the right to exercise, or exercises, significant control over, or has the right to provide or provides significant assistance in, the franchisee’s method of operation, including building design and furnishings, locations, business organization, marketing techniques or training.
The distribution branch (clause (b)). The franchisor grants representational or distribution rights for goods or services supplied by it or a designated supplier, whether or not a trademark is involved, and the franchisor or a designated third person provides location assistance, such as securing retail outlets, accounts or sites for vending machines or displays.

A typical brand licence easily meets the payment element and the trademark element of clause (a). The question is usually the last one: how much control or assistance the licensor has the right to exercise or provide.

How to tell which one you have, step by step

Is there a payment to you? Royalties, licence fees, required purchases from you or your associate, or any other direct or indirect payment. If not, the definition is not met.
Is the other business selling under your brand? Goods or services “substantially associated” with your trademark, trade name or logo point toward clause (a).
How much say do you have in how it runs? List every right you will have: approving locations, design and furnishings, training, marketing methods, operating manuals, business organization. The Act counts both the right to exercise significant control and actually exercising it, and both providing significant assistance and having the right to provide it.
Do you help find locations for distributed products? That is the clause (b) test.
Does an exclusion apply? Check the list in section 2(3), set out in the table below.
Is the agreement in writing? An arrangement arising from an oral agreement, with no writing evidencing any material term, is excluded (section 2(3), paragraph 7), but almost every real brand deal has writing.
Decide, and document why. Section 12 says the burden of proving an exemption or exclusion is on the person claiming it, so keep a record of the analysis.

Relationships the Arthur Wishart Act does not apply to (section 2(3))
Exclusion	What it covers	Paragraph
Employment	An employer-employee relationship	1
Partnership	A partnership	2
Co-operative	Membership in a co-operative association, as defined in the regulation	3
Certification marks	Using a symbol of a person who offers, for consideration, a service for evaluating, testing or certifying goods or services	4
Single licence	An agreement between a licensor and a single licensee for a specific trademark or symbol, where the licence is the only one of its general nature and type the licensor grants in Canada for that mark	5
Space in another retailer	Leasing space in another retailer’s premises, without being required or advised to buy goods or services from that retailer or its affiliate	6
Oral arrangements	An arrangement from an oral agreement with no writing evidencing any material term	7
Crown arrangements	A service contract or franchise-like arrangement with the Crown or a Crown agent	8

What changes the answer

The single licensee exclusion is narrow

Paragraph 5 of section 2(3) only helps if the licence is the only one of its general nature and type that you grant in Canada for that mark. A second similar licence, anywhere in Canada, takes the arrangement outside the exclusion, and the definition then has to be tested on its own terms.

Control over quality versus control over operations

Federal trademark law ties a licensee’s use to the owner’s control of quality. Section 50(1) of the federal Trademarks Act says that where a licensee uses a trademark under a licence and the owner has direct or indirect control of the character or quality of the goods or services, the licensee’s use has the same effect as use by the owner. The Arthur Wishart Act, by contrast, looks at significant control over, or assistance in, the franchisee’s method of operation. The two are different questions, and a licence that limits itself to product quality standards is in a different position from one that also dictates site design, training and marketing. Drafting the control clauses carefully is the heart of a brand licence.

If the arrangement is a franchise

The consequences are significant. The franchisor must deliver a complete disclosure document at least 14 days before the franchisee signs or pays (section 5(1)). If it never does, the franchisee can rescind up to two years after entering into the agreement (section 6(2)), and the franchisor must then refund money, buy back inventory, supplies and equipment, and compensate the franchisee’s losses (section 6(6)). Both sides also owe a duty of fair dealing (section 3), and the franchisee has the right to associate with other franchisees (section 4). We explain these rules in what Ontario’s franchise disclosure law requires.

Protecting the brand first

You can only license what you own. The Canadian Intellectual Property Office explains that registering a trademark gives the sole right to use it across Canada for 10 years, renewable every 10 years, and that a certificate of registration is direct evidence of ownership. Unregistered marks may carry rights under common law, but the Office warns that proving them in a dispute can be long and expensive. Some owners hold their trademarks in a separate company; see what a holding company is, and when Ontario owners use one.

Enforcing against infringers

Under section 50(3) of the Trademarks Act, subject to the licence agreement, a licensee can call on the owner to take infringement proceedings, and if the owner does not do so within two months, the licensee can sue in its own name, adding the owner as a defendant. A licence agreement usually deals with who enforces the mark.

Example

For example, imagine Nora, who owns a well-known skincare brand in Richmond Hill. A salon owner in Vaughan wants to sell Nora’s products and offer treatments under her brand, paying a monthly fee. If the agreement only lets the salon use the brand on products bought from Nora, with quality standards for how the products are stored and described, Nora is close to a plain brand licence, though the payment and trademark elements of the definition are still met.

Now suppose Nora also requires the salon to follow her operations manual, use her floor plan and furnishings, attend her training and run her marketing campaigns. That is significant control over the salon’s method of operation, and the arrangement is likely to be a franchise under clause (a). If this is the only licence of its kind Nora grants in Canada, the single licensee exclusion could apply; once she signs a similar deal with a second salon, it no longer does. Before signing, Nora decides with her lawyer whether to keep the licence narrow or to prepare a disclosure document and run it as a franchise.

What a brand licence agreement usually covers

Every licence is drafted for its deal, but most deal with the same core points:

What is licensed: the specific marks, logos or other intellectual property, and confirmation of who owns them.
Scope: the goods or services, the territory, and whether the licence is exclusive.
Fees: how royalties or fees are calculated, reported and paid.
Quality standards: enough control of the character or quality of the goods or services to support the owner’s use of the mark, drafted with the franchise definition in mind.
Term, renewal and termination, and what happens to stock and signage at the end.
Enforcement and indemnities: who deals with infringers, and who bears claims.
Confidentiality for any know-how shared.
Restrictions after it ends, such as on using the brand or competing; if the licensee is an individual who becomes your employee, see are non-compete clauses enforceable in Ontario.

Common mistakes

Calling it a licence and assuming the Act cannot apply. The substance decides.
Adding operational controls later. An operations manual, mandatory training or site approval rights can turn a licence into a franchise.
Relying on the single licensee exclusion for a second deal. It covers only the one licence of its kind in Canada.
Licensing a mark you have not protected. Check ownership and registration first.
No written analysis. If an exclusion is claimed, the burden of proving it is on the person claiming it. A buyer of your business will look for it in due diligence.
Ignoring disclosure once it is a franchise. Without it, the franchisee can rescind for up to two years.

What to do this week

List exactly what you want the other business to be able to do with your brand.
List every right you want over how it operates: locations, design, training, marketing, manuals, suppliers.
Note every payment that will flow to you or a related company.
Check whether your marks are registered, using the Canadian Trademarks Database the Canadian Intellectual Property Office provides.
Count how many similar licences you have granted, or plan to grant, in Canada.
Gather the documents listed in what to bring to a corporate consultation.
If you would like the structure reviewed, a first consultation takes 30 minutes, by video or in person, and you can request one here.

Frequently asked questions

Is every brand licence a franchise in Ontario?

No. A licence is a franchise only if it meets the definition in section 1(1) of the Act, including payment and either significant control or assistance (clause (a)) or location assistance for distribution (clause (b)), and no exclusion in section 2(3) applies.

Does a franchise agreement have to say “franchise” to be one?

No. The definition turns on what the relationship involves, and section 11 prevents a franchisee from waiving its rights under the Act.

What if the agreement is only oral?

Section 2(3), paragraph 7, excludes an arrangement arising from an oral agreement where no writing evidences any material term. The exclusion needs there to be no writing at all evidencing any material term, so it rarely fits a real brand deal.

Can I license my brand to a related company?

Yes, and the same definition applies. Arrangements between an owner’s own companies are worth documenting carefully, since the Act defines a franchisor’s associate by control.

How long does trademark registration last?

The Canadian Intellectual Property Office says 10 years from registration, renewable every 10 years.

Can a licensee stop someone copying the brand?

Under section 50(3) of the Trademarks Act, unless the licence agreement says otherwise, a licensee can ask the owner to act and, if the owner does not within two months, sue in its own name with the owner as a defendant. Disputes need separate advice. You can read about our lawyers before you call.

Sources

This page is general information about Ontario law, not legal advice for your situation. It reflects the law as of October 26, 2026.

Licensing your brand or franchising: which one applies in Ontario?