Provinces in Canada with Franchise Legislation

By Tonya Mah

Currently in Canada, the provinces of British Columbia, Alberta, Manitoba, New Brunswick, Ontario and Prince Edward Island have legislation regulating the relationship between franchisors and prospective franchisees/ franchisees. 

A Franchisor is a person who grants or offers to grant a franchise.

A Franchisee is a person to whom a franchise is granted.

A prospective franchisee is a person who has indicated to a franchisor an interest in entering into a franchise agreement.

Within Canada, the provincial franchise legislation has the following common elements:

1. Disclosure - obliging franchisors to disclose specified information/documents to prospective franchisees prior to prospective franchisees contractually committing to and/or investing money in the franchise;
2. Duty of Good Faith - imposing a duty of good faith and fair dealing on the franchisee and the franchisor in the performance and enforcement of the franchise agreement;
3. Right to Associate - providing franchisees with the right to associate and organize with other franchisees;
4. Right of Action - establishing consequences should a franchisor or franchisee fail to comply with or breach the requirements contained in the franchise legislation, including the right to seek damages and rescission of the franchise agreement; and
5. Can’t Opt Out - codifying that prospective franchisees/franchisees cannot contract out of, waive or release, the rights they receive, from, or the requirements imposed upon franchisors pursuant to, the franchise legislation.

Understanding franchise law is crucial for both franchisors, franchisees and prospective franchisees. The complexities of franchise agreements, disclosure requirements, and regulatory compliance demand careful consideration and expert guidance. By staying informed about the key aspects of franchise law, businesses can navigate the legal landscape more effectively, ensuring that their franchise operations are both legally sound and successful. For anyone involved in the franchise industry, remaining updated on legal developments and seeking professional advice can make a significant difference in achieving long-term success.

The application and outcome in franchise law is very fact specific, please contact Tonya Mah (tmah@sorbaralaw.com) should you have any questions or wish to obtain legal advice for your franchise, prospective franchise or franchisor.