JSB, yep, that's about how it works. How can a municipality ask for licenses when the government does not want to recognize a professional order to the massage professionals. The FQM is entirely private, not recognized in any way by the government of Québec. Of course, the professional members of the FQM would like the erotic massage industry to collapse, it drains their customers. You can be certain that they let it know. It is absolutely fine, IMHO, that the authorities try to control the implantation of erotic massage lounges under the cover of professional massotherapy banners.
The new phenomenon that we have seen is that due to powers recently confirmed by the government of Québec, the local authorities may decide to restrict the number of permits they emit for erotic businesses. Some are quite radical, like Saint-Laurent with no permit at all, some are questionable, like Sainte-Foy, a borough of Québec: 2 permits for a population of 100000.
Spacecadet, I am not so sure. Decriminalization in Canada will never be a free for all. Of course no massage parlor will be prosecuted anymore under the section 210 (bawdy house), but municipalities will all have a big say. And I presume that buddy rub parlor will have distinct permits from bordellos.