Canadian franchising is subject to a variety of unrelated federal and provincial regulations. Federal legislation includes laws governing competition, income tax, packaging and labelling, privacy, foreign investment and intellectual property (IP) statutes. Applicable provincial laws govern franchise disclosure, sales tax, liquor licensing, class-action and for Quebec's franchisees, the Charter of the French Language of Quebec and the Quebec Civil Code.

Variation is not the only constant in Canadian franchising. Franchise disclosure laws in Alberta, Ontario and Prince Edward Island mean a significant portion of Canada's major commercial markets are now subject to franchise legislation. New Brunswick passed a Franchises Act of its own on June 26, 2007, though it is not yet in effect. The province is now studying a draft regulation to specify what disclosure will be required under the province's law, and the final disclosure regulation is expected to be enacted at the beginning of 2010.

Franchise legislation in Alberta, Ontario and P.E.I., imposes a duty on both the franchisee and franchisor to deal with each other fairly. Claims by either side that the other party has breached this duty are now commonplace in franchise disputes and court cases. Standard franchise documents must be modified to account for the application of e-commerce, the Internet and new privacy laws.

Franchise Disclosure laws

Ontario's Arthur Wishart (Franchise Disclosure) Act, 2000

This act applies to a franchise agreement (including a renewal or extension) entered on, or after, July 1, 2000, if the franchised business is to be operated partly or wholly in Ontario. The act defines a franchise as a right to engage in a business in which the franchisor grants a franchisee (you) the right to sell goods or services largely associated with the franchisor's trademark. This right will be in accordance with a franchise program, i.e. a particular marketing program, store appearance and operation, etc., and granted in exchange for payment by the franchisee. Here are some of the other rights granted by the Arthur Wishart Act:

Fair dealing

The act states every franchise agreement (including any agreement related to the franchise) imposes a 'duty of fair dealing' on franchisee and franchisor. This includes acting in good faith and in accordance with reasonable commercial standards.

Association

The act allows franchisees to associate with other franchisees and form or join organizations to advance franchisee interests. Franchisors may not interfere with, prevent or prohibit a franchisee from doing this.

Delivery of the disclosure document

A franchisor is required to provide a disclosure document not less than 14 days before:

1. The signing by the franchisee of the franchise agreement or any other agreement relating to the franchise.
2. The payment of any consideration, i.e. money, relating to the franchise.

A disclosure document provides substantial information about the franchise that can assist you in making an informed investment decision. A disclosure document must include the franchisor's financial statements and information relating to costs of establishing the franchise, annual operating costs (if provided), earnings projections (if provided), financing arrangements, training, use of advertising funds, purchase restrictions, volume rebates, trademarks, licences, required participation in the operation of the business, exclusive territory, encroachment, current and past franchisees, closures and termination, renewal and transfer conditions. The Arthur Wishart Act also requires the franchisor to include risk warnings and copies of all agreements relating to the franchise.

Rescission

You may rescind the franchise agreement, without penalty or obligation, within 60 days of signing the franchise agreement or paying any consideration, if your franchisor fails to provide the disclosure document within the prescribed time or if its contents do not meet the Arthur Wishart Act's statutory requirements. If the franchisor never provided a disclosure document at all, you can rescind the franchise agreement, without penalty or obligation, within two years after entering into the agreement or paying any consideration. Should you do so, your franchisor has 60 days to:

1. Refund any money received from you or received on your behalf (other than money for inventory, supplies or equipment).
2. Purchase your inventory, supplies and equipment at a price equal to the purchase price you paid.
3. Compensate your losses in acquiring and operating the franchise, less the amounts expended on the repurchase of the foregoing items.