Franchising Law in Ontario
Franchising is one of the fastest growing methods of business expansion and organization in Canada.
Franchising is about sharing success.
When a franchisee succeeds, the franchisor also succeeds, and vice-versa. It’s a win-win scenario.
Here’s how it works:
The franchisor and the franchisee enter into an agreement. Under it, the franchisor licenses the franchisee the right to sell products and services under the franchisor’s trademark.
The franchisee uses the franchisor’s prescribed business format and benefits from brand recognition. The franchisee must comply with the standards of the franchise system.
The franchisee pays the franchisor an upfront fee and continuing royalties. Franchise agreements can vary, from master franchise relationships encompassing multiple locations to single unit franchise agreements for individual locations.
Ontario is one of only two provinces in Canada with legislation specifically governing certain aspects of franchising (the other province is Prince Edward Island).
The Arthur Wishart Act (Franchise Disclosure) (Ontario) is administered by the Ontario Ministry of Consumer and Business Services.
The Act broadly defines a franchise. Thus, many distribution and dealership arrangements may also be subject to the Act’s requirements.
The Act has disclosure requirements and several relationship provisions. The Act requires fair dealing between parties to franchise agreements and requires that franchisees be allowed to associate.
Franchisors must provide a disclosure document to prospective franchisees. The disclosure document must contain copies of all franchise agreements and financial statements, and all material facts including specifically listed material facts.
Financial statements prepared in accordance with generally accepted accounting principles (GAAP) must normally be included within the disclosure statement.
The disclosure document must also include a certificate certifying that the disclosure document contains no misrepresentation.
The franchisee has a private right of action for damages against the franchisor and every person who signed the disclosure document if the franchisee suffers a loss because of a misrepresentation contained in the disclosure document. If the franchisee did not receive the franchise disclosure document within the prescribed time limits, the franchisee can rescind all franchise agreements.
If you are thinking about entering into a franchise relationship, give us a call.
Whether you’re a franchisor, franchisee, or franchise association, our team at results-oriented professionals at HLF will safeguard your business rights while fostering constructive franchise relationships. Among other things, we can advise you of your rights, responsibilities and obligations, we can negotiate on your behalf, and we can draft the necessary documents.
We can draft various agreements including:
product and service distribution, product licensing, manufacturing, and intellectual property, including trademarks, patents and copyright, as well as documents like training and operations manuals, disclosure documents and franchisee recruitment kits.
We can assemble and work with a team of other franchise support services professionals, such as a banker, accountant and marketer, to help you on your path to commercial success.
