The disclosure document is the centrepiece of franchise law in
Canada. In those provinces which have franchise legislation,
franchisors are required to provide prospective franchisees with a
sufficient amount of background on the system via the disclosure
document so that those prospects can make informed investment
decisions about whether they want to become a franchisee or
One of the tenets of franchise law is that, while containing all
the requisite pieces of information which the legislation requires,
disclosure documents must also be "clear and
concise". Conciseness is generally anathema to lawyers,
and those who practice in franchising are no exception. As a
result, it is not uncommon to come across disclosure documents that
are anywhere from 100 - 400 pages long, depending on the number of
attachments to the main document.
It is a tough balancing act which those of us who draft
disclosure documents day in and day out must abide by. On the
one hand, we want to be sure that our franchisor clients are
leaving no stone unturned in their disclosure so that every
question which a franchisee may have can be answered within the
pages of that document. After all, franchise legislation sets
out a laundry list of categories of information which have to be
disclosed, with the basket provision that all "material
facts" must also be included. We want to make sure
we're not missing anything.
On the other hand, an information package which pages number in
the hundreds is unlikely to meet that threshold of clarity and
conciseness that goes to the raison d'etre of a disclosure
document - so that the franchisee can understand it! Many
times, franchisees will deliver a disclosure document to their
lawyers without ever having actually read it, so daunted they are
by its volume and breadth.
There is no doubt that, in order to protect our franchisor
clients, franchise lawyers must draft lengthy disclosure documents
to ensure that all of the potentially relevant information which a
franchisee should or needs to know be included. In that
respect, one should not expect a disclosure document to be
"concise" as that term may be generally understood.
Perhaps a disclosure document's conciseness should be measured
against other disclosure documents as a reference point for when
one has gone on far longer than need be.
However, it is incumbent upon us as franchise lawyers to ensure
that we control the "clarity" element of the information
which gets presented to franchisees. Just because a document
is long doesn't mean it can't be written in plain
English. If we want to ensure complaint franchise disclosure
documents which accomplish their legislative purpose, perhaps it is
time that we draft them in more accessible language rather than as
correspondence between legal advisors.
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.
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