Franchise Legislation in Canada
Franchise Legislation in Canada
The provisions of the Alberta Act applies to the sale of a franchise if the franchised business is to be operated partly or wholly in Alberta and the purchaser of the franchise is an Alberta resident or has a permanent establishment in Alberta. Whereas; in Ontario and PEI the acts apply only if the franchised business is to be operated partly or wholly in those provinces respectively.
The franchisor is required to provide you with a copy of their disclosure document at least 14 days before the signing of any agreement relating to the franchise, or the payment of any consideration relating to the franchise, whichever is earlier. If you are investigating a franchise in a province other than Alberta, Ontario and PEI, and the franchisor is operating in any of those provinces, you can request a copy of the franchisor's disclosure document that the franchisor is required to provide in those provinces. The disclosure document must contain copies of all proposed franchise agreements, financial statements of the franchisor, reports and other documents in accordance with the regulations. A certificate must be signed by at least 2 officers or directors of the franchisor, which states that the disclosure document contains no untrue statement of a material fact and does not omit to state a material fact. The information contained in the disclosure provides a good basis for assessing the merits of a franchise operation but don’t assume that the franchisor’s compliance with disclosure or registration requirements implies that the regulatory authority has approved or recommends the franchise in any way. It is essential that you verify the information disclosed by the franchisor by speaking with existing franchisees, your lawyer, your accountant, or a franchise consultant.
Earnings Claims
The franchisor is required to provide details of any earnings claims information used by the franchisor, including material assumptions underlying its preparation and presentation, whether it is based on actual results of existing outlets and the percentage of outlets that meet or exceed each range of results. The earnings claim information must have a reasonable basis at the time it is prepared. The disclosure documents must also state the place where substantiating information is available for inspection by franchisees. If the information is given in respect of a franchisor-operated outlet, the franchisor must state that the information may differ in respect of a franchisee outlet. Earnings claims consist of information from which a specific level or range of actual or potential sales, costs, income or profit from franchisee or franchisor outlets can be ascertained.
Franchisee’s Right of Rescission
If a franchisee suffers a loss because of a misrepresentation contained in a disclosure document, the franchisee has a right of action for damages against the franchisor and every person who signed the disclosure document. If the franchisor fails to provide the disclosure document within the time requirements, the prospective franchisee may rescind the agreement by giving notice of cancellation no later than 60 days after receiving the disclosure documents, or no later than 2 years after the granting of the franchise. A franchisor must, within 30 days of receiving a notice of cancellation, compensate the franchisee for any net losses the franchisee has occurred in acquiring, setting up, or operating the franchised business.
Norman P. Friend
President
Franchise 101 Incorporated.
Franchise Legislation in Canada - To learn more about this author, visit Norm Friend's Website.
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Until 1997, Canada had been relatively free of franchise legislation, with Alberta being the only province in Canada to have legislation directed specifically at franchising. However, the increasing number of law suits between franchisor and franchisee has prompted other provinces to re-assess the need to introduce some form of franchise legislation. On May 17, 2000 the Arthur Wishart Act (Franchise Disclosure), 2000 (the " Ontario Act”) was passed by the Ontario Legislature and came into force on January 31, 2001. In substance, the Ontario Act is very similar to the Alberta Act. In June 2205, Prince Edward Island enacted franchise legislation (the “PEI Franchises Act”), which is similar in respect of disclosure requirements to both Alberta and Ontario’s disclosure requirements.
The provisions of the Alberta Act applies to the sale of a franchise if the franchised business is to be operated partly or wholly in Alberta and the purchaser of the franchise is an Alberta resident or has a permanent establishment in Alberta. Whereas; in Ontario and PEI the acts apply only if the franchised business is to be operated partly or wholly in those provinces respectively.
The franchisor is required to provide you with a copy of their disclosure document at least 14 days before the signing of any agreement relating to the franchise, or the payment of any consideration relating to the franchise, whichever is earlier. If you are investigating a franchise in a province other than Alberta, Ontario and PEI, and the franchisor is operating in any of those provinces, you can request a copy of the franchisor's disclosure document that the franchisor is required to provide in those provinces. The disclosure document must contain copies of all proposed franchise agreements, financial statements of the franchisor, reports and other documents in accordance with the regulations. A certificate must be signed by at least 2 officers or directors of the franchisor, which states that the disclosure document contains no untrue statement of a material fact and does not omit to state a material fact. The information contained in the disclosure provides a good basis for assessing the merits of a franchise operation but don’t assume that the franchisor’s compliance with disclosure or registration requirements implies that the regulatory authority has approved or recommends the franchise in any way. It is essential that you verify the information disclosed by the franchisor by speaking with existing franchisees, your lawyer, your accountant, or a franchise consultant.
Earnings Claims
The franchisor is required to provide details of any earnings claims information used by the franchisor, including material assumptions underlying its preparation and presentation, whether it is based on actual results of existing outlets and the percentage of outlets that meet or exceed each range of results. The earnings claim information must have a reasonable basis at the time it is prepared. The disclosure documents must also state the place where substantiating information is available for inspection by franchisees. If the information is given in respect of a franchisor-operated outlet, the franchisor must state that the information may differ in respect of a franchisee outlet. Earnings claims consist of information from which a specific level or range of actual or potential sales, costs, income or profit from franchisee or franchisor outlets can be ascertained.
Franchisee’s Right of Rescission
If a franchisee suffers a loss because of a misrepresentation contained in a disclosure document, the franchisee has a right of action for damages against the franchisor and every person who signed the disclosure document. If the franchisor fails to provide the disclosure document within the time requirements, the prospective franchisee may rescind the agreement by giving notice of cancellation no later than 60 days after receiving the disclosure documents, or no later than 2 years after the granting of the franchise. A franchisor must, within 30 days of receiving a notice of cancellation, compensate the franchisee for any net losses the franchisee has occurred in acquiring, setting up, or operating the franchised business.
Norman P. Friend
President
Franchise 101 Incorporated.
Franchise Legislation in Canada - To learn more about this author, visit Norm Friend's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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