Franchise sales in Canada's most populous province, Ontario, are regulated by the Arthur Wishart Act, S.O. 2000, c. 3 (the "Act"), which requires franchisors to provide pre-sale disclosure (in the form of a disclosure document) to prospective franchisees before a franchise agreement is signed or consideration exchanged. The disclosure document must include prescribed information, as well as all other "material facts." Furthermore, a franchisor owes a continuing obligation to its prospective franchisees under the Act to disclose any "material change" that occurs between the delivery of the disclosure document and the execution of a franchise agreement.
Courts have acknowledged that the purpose of the Act is to protect franchisees by ensuring that they have the information necessary to enable them to make informed investment decisions, and the Courts have construed the Act liberally to accomplish this purpose. For example, the Ontario Court of Appeal has held that "the purpose of the legislation is to protect franchisees and [that] the mechanism for so doing is the imposition of rigorous disclosure requirements and strict penalties for non-compliance. The legislation must be considered and interpreted in light of this purpose." 6792341 Canada Inc. v. Dollar It Limited, 2009 ONCA 385, at *72.
Previously published in the Franchise Lawyer (Vol. 16, No. 1).
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