By Frank Zaid

The franchise relationship is governed principally by the franchise agreement, which is between a franchisor—i.e. the entity that owns the franchise system rights—and the franchisee—i.e. the individual who obtains the right to operate a business in accordance with the franchisor’s business standards and trademarks.

Franchise legislation has been enacted in five provinces: Alberta, Ontario, Prince Edward Island, New Brunswick and Manitoba (in that order). In Quebec, franchising is generally regulated under the Civil Code, which recognizes franchise agreements as contracts of adhesion.

Over the years, franchise disputes have been heard by the courts on an individual basis with relation to the specific franchisee and franchisor. There has also been a rapid escalation of multi-franchisee disputes, however, revolving around issues common to all or virtually all of the franchisees—both past and present—within a system.

After the introduction of class action legislation in all provinces except Manitoba, disputes common to distinguishable groups of all or substantially all of the franchisees within well-known systems have become the subject matter of very large and significant lawsuits. With all of this activity, it is highly likely many more franchise disputes will be directed to alternative dispute resolution (ADR)—i.e. a method of resolution outside the usual process of litigation in court.

Read the full article: Q&A with Frank Zaid