Ontario disclosure – Franchisee Protection

20
October
2014
Franchise Basics

In Canada, franchising is regulated at the provincial level.  Ontario’s franchise legislation is named the Arthur Wishart Act (Franchise Disclosure) 2000 (the “Wishart Act”).  The Wishart Act basically follows the US model of requiring a disclosure by a franchisor to prospective franchisees.  This is remedial legislation, aimed at ensuring that franchisees are sufficiently informed prior to undertaking the significant financial risks of acquiring a franchise.

 

The Wishart Act applies to all franchised businesses that are operated, or that will be operated, partly or wholly in Ontario.  The Act:   l)  imposes an obligation on the franchisor to deliver disclosure information to prospective franchisee, 2)  imposes a duty of fair dealing on both parties to a franchise agreement (in respect of the performance and enforcement of the agreement), and 3)  gives franchisees a right of association with one another.

 

Each franchisor to which the Wishart Act applies has an obligation to deliver a disclosure document, personally or by registered mail, to each prospective franchisee. The disclosure document must be accurate, clear and concise, and must meet the requirements set out in the regulations to the Wishart Act.  All the prescribed information must be contained in a single document, and must be delivered at least 14 days prior to the date on which the franchisee executes an “agreement relating to the franchisee”, or the date on which the franchisee pays considerations to the franchisor, whichever comes first (as set out in section 5(1) of the Wishart Act).

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