Franchise Sold? Your Years of Service May Still Count in Ontario

When a franchise is sold in Ontario, employees are often left in the dark.

One day, everything looks normal. The next day, there is a new owner, a new manager, a new contract, or a severance package on the table.

That is when the questions start:

Do I still have a job?
Do my years of service still count?
Who owes me severance if I am let go?
Do I have to sign the new contract?
Can they really tell me I am starting from zero?

In many cases, the answer is no. A franchise sale does not automatically wipe out an employee’s service or legal rights.

That is the key point.

If your workplace has changed hands, do not assume the employer’s version is right. And do not sign anything before you understand what the sale means for your job, your severance, and your wrongful dismissal rights.

Who is the employer in a franchise business?

This is where many employees get misled.

Most people think they work for the big brand on the sign. Often, they do not.

In a franchise system, the brand owner is usually the franchisor. The local store is usually owned and operated by a franchisee. That means the legal employer is often the franchisee’s corporation, not the well-known company whose name appears on the storefront.

So if you work at a franchised restaurant, coffee shop, or retail location, your legal employer may actually be a numbered company or local operating company.

That matters because when the franchise is sold, the legal employer may change even if the business looks exactly the same from the outside.

Same sign. Same uniform. Same customers. Different legal reality.

Franchise sale in Ontario: asset purchase vs. share purchase

When a franchise changes hands, the deal is usually structured in one of two ways.

Share purchase

In a share purchase, the buyer purchases the shares of the corporation that already owns the business.

The owner changes. The employer corporation often does not.

For employees, that is usually the less disruptive situation because the legal employer may still be the same company.

Asset purchase

In an asset purchase, the buyer purchases the business assets instead of the shares.

That often means a new corporation takes over operations. Employees may be offered work by that new company rather than continuing with the old employer.

This is where employers often try to tell workers that they are starting over.

That is not always true.

If a franchise is sold through an asset purchase, do employees keep their years of service?

Often, yes — at least for Employment Standards Act purposes.

Ontario law has continuity rules for the sale of a business. In many asset purchase situations, if the buyer hires the seller’s employee, that employee’s past service can count as service with the new employer for statutory purposes.

So if you worked for the old franchisee for 8 years and the new owner keeps you on, those 8 years may still count when later calculating minimum statutory entitlements.

That can affect:

• termination pay

• statutory severance pay

• vacation entitlements tied to service

• other ESA rights based on length of employment

This is one of the biggest mistakes employees make after a sale: they assume the employer is right when they are told their service has been reset.

Sometimes it has not.

Does continuity of employment always apply after a franchise sale?

No. The facts matter.

Timing matters. The structure of the deal matters. What happened to each employee matters.

Some employees are kept on right away. Some are offered new contracts. Some are not hired at all. Some are kept, but only on worse terms.

That is why these cases should never be treated like routine paperwork. A franchise sale can create real legal issues for employees, and those issues often need to be analyzed one worker at a time.

Who owes severance when a franchise is sold in Ontario?

That depends on what happened after the sale.

If the new owner does not hire the employee

If the purchaser does not hire the employee, the old employer may owe termination pay and, where the legal test is met, statutory severance pay.

That is often the clearest case.

If the new owner hires the employee

If the purchaser hires the employee and employment continues, prior service may carry forward for minimum statutory purposes.

So even if the new owner says, “You have only been with us a few months,” that may not be the full legal picture.

If the new owner hires the employee but makes the job worse

This is common after a sale.

The new owner keeps the employee, but changes the deal in a major way. For example:

• lower pay

• fewer hours

• demotion

• loss of bonus eligibility

• a move to another location

• a new contract with worse termination language

That may raise constructive dismissal issues.

In other words, keeping your job on paper does not always mean your rights are being respected in practice.

Severance pay after an asset purchase in Ontario

Employees often use the word “severance” to mean any termination package. Ontario law does not.

The law separates:

• termination pay

• statutory severance pay

And beyond those minimum standards, an employee may also have a common law claim for a much larger package.

This matters because employers often offer the minimum and hope the employee does not question it.

If you were let go after a franchise sale, do not assume the number in front of you is fair. It may reflect only minimum ESA entitlements, not the full value of your claim.

A severance package review can help you find out what your case may actually be worth.

Wrongful dismissal after a franchise sale

This is where employees often lose leverage.

They are told the sale changed everything. They are told their service no longer counts. They are told they have no choice but to accept the new contract or the package being offered.

That is not always true.

Ontario’s continuity rules matter. But common law wrongful dismissal is a separate analysis. Courts may still look at:

• whether you signed a new contract

• whether your prior service was recognized or excluded

• the wording of the termination clause

• your age, role, compensation, and length of service

• whether your years with the old employer should still affect reasonable notice

So yes, the statutory rules can preserve minimum rights. But your wrongful dismissal Ontario franchise sale claim may be worth much more than the employer suggests.

That is why a fresh offer letter after a sale should never be treated as harmless paperwork.

It can affect future notice rights. It can limit severance rights. And once it is signed, it can be much harder to undo the damage.

Before you sign, get an employment contract review.

A franchise sale does not automatically reset an employee’s clock

This is one of the most common myths in franchise employment law.

Employees are often told that once the business is sold, their old service no longer counts. In Ontario, that is often wrong.

If the business continues and the new owner keeps the staff, prior service may still count for important statutory purposes. And even where the common law analysis is more complicated, that past service may still matter.

So the real questions are not just, “Was the franchise sold?”

The real questions are:

• who was the legal employer before the sale?

• was the deal an asset purchase or a share purchase?

• did the new owner keep the employee on?

• was the employee asked to sign a new contract?

• were pay, title, duties, location, or hours changed?

• what exactly is being offered if employment ends?

Those answers can change the value of a case significantly.

What employees should do if a franchise changes owners

If your workplace has been sold, keep copies of:

• your original offer letter

• any later contracts

• pay stubs and T4s

• any new contract from the purchaser

• emails announcing the sale

• any termination letter, release, or severance package

• communications showing changes to pay, title, duties, or schedule

And most importantly: do not rush.

Do not sign a release because you feel pressured.
Do not assume the new contract is standard.
Do not accept the employer’s explanation without checking it.

Once documents are signed, your options can narrow quickly.

FAQs: franchise sales and employee rights in Ontario

Do employees keep their years of service when a business is sold in Ontario?

In many cases, yes. If the buyer hires the employee after the sale of the business, prior service may carry forward for statutory purposes under Ontario law.

If a franchise is sold, do employees automatically become employees of the new owner?

Not automatically. Some are retained. Some are offered new employment on new terms. Some are not hired at all.

Can an employee get severance after a franchise sale?

Yes. Depending on the facts, the employee may be entitled to termination pay, statutory severance pay, or a larger common law package.

Does an asset purchase wipe out wrongful dismissal rights?

No. An asset purchase does not automatically erase an employee’s rights. It changes the analysis, but it does not wipe the slate clean.

What if the new franchise owner offers a new contract?

Do not assume it is routine. It should be reviewed before you sign it. New termination language and service-recognition language can directly affect future rights.

The bottom line

If a franchise is sold in Ontario, employees do not automatically lose their years of service or severance rights.

In many asset purchase situations, service with the old franchisee may still matter for statutory purposes if the new owner keeps the employee on. And depending on the facts, the employee may also have a larger wrongful dismissal or constructive dismissal claim.

If you were terminated after a franchise sale, pushed to sign a new contract, or handed a severance package after a change in ownership, do not assume the employer’s version is right.

At Vanguard Law, we act for employees across Ontario in wrongful dismissal, constructive dismissal, employment contract review, and severance package disputes.

If your franchise workplace was sold and you are worried about your job, your service, or your severance, contact Vanguard Law before you sign anything.

This article is for general informational purposes only and is not legal advice. Legal rights depend on the facts, the governing contracts, and the structure of the transaction.