Many equate a franchise with the well-known and recognized
quick-service restaurants and coffee shops that are prevalent in
most communities. But you would be surprised to learn that many of
the goods and services providers that you use on a regular basis
are franchised. In fact, the use of franchising as a means of
distributing goods and services, both to consumers and to other
businesses, crosses almost every business category. What may be
more surprising is that your distribution arrangement may be a
franchise under provincial franchise law and thus subject to strict
disclosure obligations and the harsh remedies for
The provinces of Ontario, Alberta, Prince Edward Island, New
Brunswick and Manitoba have each enacted franchise legislation
which requires pre-sale disclosure to prospective franchisees in
order to ensure that a prospective franchisee has the information
necessary to make an informed investment decision. The legislation
and, in particular, the disclosure obligation imposed on
franchisors, has been broadly interpreted by the Courts in order to
remedy the perceived imbalance of power in the
franchisor-franchisee relationship. Failure to provide proper
disclosure in compliance with the legislation may permit a
franchisee to rescind (terminate) the franchise agreement, with the
resulting obligation imposed on the franchisor to compensate the
franchisee for the costs, expenses and losses incurred in
establishing its franchised business. The legislation also provides
franchisees with the right to bring a claim against the franchisor
and against others involved in the franchise grant in their
personal capacity, for misrepresentation or for failure to comply
with the disclosure requirements.
A "franchise" means a right to engage in a business
where the franchisee is required to make a payment or payments to
the franchisor in order to acquire or operate the business, and
where the franchisor either:
grants the franchisee the right to sell goods or services that
are substantially associated with the franchisor's trade-mark
or other commercial symbols while exercising significant control
over the franchisee's method of operation (or, under
Alberta's legislation, the business is to be operated in
accordance with the franchisor's marketing or business plan);
grants the franchisee the distribution rights to sell goods or
services supplied by the franchisor while providing location
assistance to the franchisee
So long as there is some payment element and an element of
control or assistance, any business arrangement that involves the
sale or distribution of goods or services associated with
another's trade-mark or brand may be a "franchise".
As a result, the definition of "franchise" can apply to
arrangements not intended by the parties to be a franchise.
You should consult with your professional advisors to determine
whether your distribution arrangements fall within this franchise
definition or to properly structure them so that they
This arises largely because of the strict wording of the
definition of "franchise", which uses relatively few, but
very broad elements to define the two types of franchise models
(business format franchises and product distribution franchises).
As a result, the definition of "franchise" may capture
business transactions whose parties may not have intended, or
anticipated, that their activities were "franchises".
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The prospect of an internal investigation raises many thorny issues. This presentation will canvass some of the potential triggering events, and discuss how to structure an investigation, retain forensic assistance and manage the inevitable ethical issues that will arise.
From the boardroom to the shop floor, effective organizations recognize the value of having a diverse workplace. This presentation will explore effective strategies to promote diversity, defeat bias and encourage a broader community outlook.
Staying local but going global presents its challenges. Gowling WLG lawyers offer an international roundtable on doing business in the U.K., France, Germany, China and Russia. This three-hour session will videoconference in lawyers from around the world to discuss business and intellectual property hurdles.
Effective September 1, 2016, the Disposition of Surplus Real Property Regulation to the Ontario Education Act was amended with the intention to reduce barriers to the formation of health and community hubs in Ontario.
This appeal relates to two generic drug submissions for two different products: exemestane and infliximab. Both submissions cross-referenced the submission of another generic company that had received a Notice of Compliance.
Two recent decisions from the Supreme Court of Canada directly affect Quebec's farm businesses by confirming La Financière Agricole du Québec's discretion in the administration of the farm income stabilization program...
On October 6, 2016, the Ontario Legislature reintroduced the Patients First Act, 2016 as Bill 41. Bill 41 is very similar to its predecessor, Bill 210, which was introduced in June 2016, but makes some important changes to the previous bill.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).