Canada - Franchising Canada - Franchising
In the restaurant sector, 35 percent of all sales are from franchise operations. In the retail sales sector, 45 percent of all sales are from franchise operations. The fastest-growing demographic of franchise buyers is women. Visit the Canadian Franchise Association’s website at www.cfa.ca.
Franchise categories experiencing the most growth are:
1) Home – Maid/Cleaning Services
2) Employment/Personnel Services
3) Real Estate
4) Educational Products & Services
5) Food – Quick Service Restaurants
(Based on increases in Franchise Canada Directory category listings between 2013 and 2018)
Alberta, Ontario and Prince Edward Island are the only provinces in Canada with legislation specifically governing certain aspects of franchising. Various governmental bodies have been charged with the administration of franchise legislation in each province: the Franchises Act (Alberta) (the "Alberta Act") is administered by the Alberta Securities Commission, the Arthur Wishart Act (Franchise Disclosure) (Ontario) (the "Ontario Act") is administered by the Ontario Ministry of Consumer and Business Services and the Franchises Act (Prince Edward Island) (the "PEI Act") is administered by the Consumer, Corporate and Insurance Services Division of the Office of Attorney General. Each of these Acts contains broad definitions of what constitutes a franchise, and as a result, many distribution and dealership arrangements may also be subject to their requirements.
In substance, the Alberta, Ontario and PEI Acts are all very similar. They primarily contain disclosure requirements and a number of relationship provisions. None of these Acts directly regulates the substantive aspects of the franchise relationship. The Acts require fair dealing between parties to franchise agreements, require that franchisees have the right to associate, and impose disclosure obligations on franchisors.
All three Acts require franchisors to 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. In Alberta and PEI, franchisors are permitted to use disclosure documents acceptable under franchise legislation in jurisdictions outside Alberta and Prince Edward Island, as the case may be, provided that these disclosure documents include, by way of an addendum or "wrap around" document, any information necessary to meet the requirements of a disclosure document under the Alberta Act or the PEI Act, as applicable. The Ontario Act does not specifically provide for an addendum or "wrap around" document. As a result, a disclosure document is often prepared for Ontario in accordance with the Ontario Act and then a "wrap around" prepared to meet Alberta and PEI requirements.
Financial statements prepared in accordance with generally accepted accounting principles must normally be included within the disclosure statement. The minimum standards of review under the Acts are those of review engagement standard. Certain franchisors are exempt from the requirement to include financial statements in their disclosure documents. The disclosure document must also include a certificate certifying that the disclosure document contains no misrepresentation. The Acts impose on the parties to a franchise agreement a duty of fair dealing in the performance and enforcement of that agreement. They also provide the franchisee 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. Also, if the franchisee did not receive the franchise disclosure document within the time limits set out in the appropriate Act, the franchisee has the right to rescind all franchise agreements.
To learn more about provincial franchising laws, visit the website of The Association of Corporate Counsel (ACC), a global bar association of in-house counsel, at www.acc.com/legalresources/quickcounsel/flic.cfm. Also, visit CFA’s website at www.cfa.ca/advocacy/franchise-legislation.
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