Franchising is becoming an increasingly common way of doing business in Canada as small-business owners are provided with the opportunity to licence another company’s or individual’s trademark(s), company name, brand, and rights in exchange for fees or royalties. Some examples of well-known franchises include Tim Hortons, Subway and McDonalds.
The agreement between the franchisee (the purchaser) and the franchisor (the seller) is known as the franchise agreement. As there is typically a power imbalance between the franchisor and franchisee, it is important to understand your rights and obligations prior to signing a franchise agreement.
Franchising is regulated in several provinces in Canada including British Columbia, Alberta, Manitoba, New Brunswick, Ontario, and Prince Edward Island. The Arthur Wishart Act governs franchise agreements in Ontario and provides information about the obligations between a franchisee and franchisor.
In accordance with the Arthur Wishart Act, franchisors have an obligation to provide all prospective franchisees with a disclosure document no less than 14 days before signing the franchise agreement and before any payment of fees is made. Judges in court have extended this to mean that if there is too much missing from a disclosure document, it was essentially not provided. The disclosure document must contain all material facts, financial statements, copies of proposed franchise agreements, and other relevant information. Also, any and all material change(s) that occur after the disclosure document is provided, must be disclosed by the franchisor to the franchisee as soon as possible once the change has occurred. Both the franchisee and franchisor also have a duty to act in good faith and fair dealing during and sometimes after the duration of the contract.
As you might expect, some problems can arise when one party does not fulfil their obligations under the franchise agreement, the franchisor does not provide full disclosure, or the franchisee does not act in accordance with the franchise agreement. Walker Law has comprehensive experience with franchise law and the potential legal implications that should be considered. We provide franchise assistance with:
To read about some of our success stories, please find previous court decision below:
To read more about obtaining a franchise and the potential legal implications, see our blogs below: