Nov 3, 2016
Franchise Law Review
New BC Regulation and case law developments
Osler’s Franchise Review contains legislative updates, commentaries on recent cases and practice tips as well as news on our team. In this edition, we take a closer look at British Columbia’s new franchise regulation as well as a number of important cases with implications for franchisors, covering when an agreement is a franchise agreement to the importance of the details in disclosure documents to documenting a franchisor’s good faith decision making in termination situations.
Andraya Frith, Dominic Mochrie, Christine Jackson, Paul Kotschorek
Almost a year to the day after the introduction of Bill 38 in the British Columbia legislature, the B.C. government released the regulation to its Franchises Act on October 3, 2016. The bill was pushed through the legislature in under a month last October and, contrary to expectations, the regulation was released in final form without a public consultation process. The B.C. government has set February 1, 2017, as the date on which the Act and the B.C. Regulation will come into effect. British Columbia is the sixth province in Canada to pass franchise legislation. We have outlined the key similarities and differences that will be of interest to franchisors.
Andraya Frith, Christine Jackson
On October 20, 2016, Mr. Arthur Potts, the Liberal MPP for Beaches – East York, introduced a Private Member’s Public Bill, Bill 47, Protecting Rewards Points Act (Consumer Protection Amendment), 2016 (the Bill). The Bill passed Second Reading on October 27, 2016 and has been referred to the Standing Committee.
Franchisors offering franchises in Ontario will be pleased to know that, earlier this year, the Ontario government released an amended regulation to the Arthur Wishart Act (Franchise Disclosure), 2000 that expressly allows franchisors to deliver their franchise disclosure documents by prepaid courier and electronically.
As of January 1, 2017, the Ontario Healthy Menu Choices Act will require restaurant chains and other food service providers with 20 or more locations operating under the same (or substantially the same) name in Ontario to provide calorie information for standard food and drink items on menus, labels and tags.
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Franchising in the courts
Andraya Frith, Paul Kotschorek, Dominic Mochrie
Ontario’s already onerous franchise disclosure requirements may have just been further complicated, based on a recent decision of the Ontario Superior Court. In the September 7, 2016 decision, the court granted a two-year rescission remedy to the franchisees primarily because the franchise disclosure document (FDD) did not contain a copy of the head lease (and associated cost information), despite the fact that no site had been identified, and therefore no head lease existed, at the time of disclosure or when the franchise agreement was executed.
A recent decision from Alberta has provided some insight into how Courts will interpret details of disclosure requirements dictated by franchise legislation. This case emphasizes that Courts intend to treat franchise legislation as consumer protection legislation requiring franchisors to carefully consider the requisite level of detail necessary for legally compliant disclosure documents.
A recent Alberta decision highlights the fact that agreements not characterized as franchise agreements by the parties, but which nonetheless fall within the scope of applicable franchise legislation, may create a franchisor/franchisee relationship regardless of the parties’ intentions.
The Alberta case of Seto v. Wendy’s reminds franchisors that the courts may scrutinize the purpose of significant decisions affecting franchisees’ interests, such as terminating a franchisee. When considering such decisions, franchisors should carefully and accurately articulate and document the underlying business rationale to defend against claims of a breach of the duty of good faith and fair dealing.
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Frequently asked questions (FAQ)
View our responses to the following questions:
- Is it sufficient if I update my disclosure document annually?
- How do operations manuals fit within a franchise program in Canada?
- Most of our competitors are heavily into social media, but we still have not gotten around to it. What legal issues should we be taking into consideration?
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Who, what, where
- Speaker, “Purchase and Sale of Franchise Business,” Franchise Law Section Institute, Ontario Bar Association, Toronto, February 8, 2017
- Speaker, “Purchase and Sale of Franchise Systems,” 16th Annual Franchise Law Conference, Ontario Bar Association, Toronto, November 17, 2016
- Speaker, “Designing and Executing Effective Franchise System Advertising Programs,” Law Day, Canadian Franchise Association, Toronto, September 22, 2016
- Roundtable Facilitator, “Dealing with Franchisee Associations,” National Convention, Canadian Franchise Association, Ottawa, April 17 – 18, 2016
- Program Chair and Speaker, “Franchising Fundamentals: Your First Franchise Client,” Franchise Law Section Institute, Ontario Bar Association, Toronto, February 2 – 6, 2016
- Roundtable Facilitator, “Customizing Disclosure Documents for Resales and Renewals,” Franchise Law Day, Canadian Franchise Association, Toronto, January 28, 2016
- Program Chair and Speaker, “Your First Franchise Client,” Young Lawyers Division and Franchise Law Section Joint Dinner Program, Ontario Bar Association, Toronto, March 10, 2015
- Speaker, “Buying and Selling the American Dream,” Franchise Law Day, Canadian Franchise Association, Toronto, January 29, 2015
- Protecting Your Franchise System on the Internet, roundtable presented at Canadian Franchise Association Law Day (September 2016).
- Speaker, "The Role of Equity in Franchise Law", 16th Annual Franchise Law Conference, Ontario Bar Association, Toronto, November 17, 2016.
- Presenter, "BC's New Franchises Act", CLEBC, Vancouver, December 5, 2016
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Osler’s Franchise group is consistently recognized by the world’s leading legal publications such as Chambers Canada, Best Lawyers in Canada and Lexpert. Our lawyers are also individually recognized in these publications. The second edition of Chambers Canada was released in October and lists Andraya Frith, Jennifer Dolman and Dominic Mochrie for their outstanding achievement in Franchise Law. Worthy of note was Jennifer’s rise to a Band 1, where she joins Andraya. In August, Best Lawyers in Canada released the 2017 results of their peer review study, which once again recognized Andraya, Jennifer, Gillian Scott and Dominic. Best Lawyers also named Andraya Lawyer of the Year, the second year in a row that a member of the Franchise group was recognized. In July, Franchise Times announced their 2016 Legal Eagles, among them were Jennifer and Gillian, noted for their litigation work, as well as Dominic for his transactional work. In June, Lexpert released the 2016 Canadian Legal Lexpert Directory. Andraya, Jennifer, Dominic and Gillian were recognized once again, with Andraya and Jennifer receiving the highest ranking, Most Frequently Recommended.
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