In March, 2013, the British Columbia Law Institute ("B.C.
Institute") published a "Consultation Paper on a
Franchise Act for British Columbia" (the "B.C.
Consultation Paper"), which includes a review of the
structures of various types of franchise systems, the legal
framework of the franchise relationship and franchise legislation
existing in five other provinces of Canada, the United States and
Australia. UNIDROIT's Model Franchise Disclosure Law
(Rome, 2002) (the "Uniform Act") is referred to
as the proper model for a Franchise Act for British Columbia
("B.C. Act"), although with some important
B.C. Institute's Tentative
With regard to a potential B.C. Act, the B.C. Institute makes
the following "tentative recommendations":
a) that British Columbia join the provinces of Alberta,
Manitoba, Ontario, New Brunswick and Prince Edward Island in
regulating franchising in "a nearly uniform regulatory
b) the Uniform Act should generally provide the model for
a B.C. Act;
c) any franchise legislation passed in B.C. should not be more
onerous than that of the currently regulating provinces;
d) mandating mediation is not seen as a
reasonable means of correcting the power imbalance in a franchise
relationship; a franchise disclosure document should, however,
contain a statement that voluntary mediation may be proposed by any
party (as provided in Ontario and Manitoba);
e) 'relationship legislation' is rejected in favour of
general statutory duties of "good faith and fair dealing in
accordance with reasonable commercial standards";
f) if a disclosure document or statement of material change
"substantially complies" with a Franchise Act and its
regulations, then it should be valid, despite having a technical
irregularity that does not affect the substance of either
g) a deposit by a prospective franchisee that does not exceed a
maximum to be established by Regulation may be taken and would be
fully refundable if the franchisee did not enter into a franchise
agreement. Further, the payment of a deposit by a prospective
franchisee would not require it to enter into a franchise
h) a disclosure document would have to state whether or not an
exclusive territory is to be granted to a franchisee;
i) a disclosure document should state whether the franchisor
intends to use alternate channels of distribution (such as the
internet) to market goods or services of a franchise system on its
j) a franchisor should be entitled to use an electronic
transmission to deliver a disclosure document under specific
conditions intended to ensure its proper delivery;
k) a franchisee should have a right of action for a misleading
profit projection, except when the projection has a reasonable
l) a franchisor may use a "wrap around" disclosure
document prepared for another jurisdiction, provided further
information required to comply with B.C. franchise disclosure
legislation is first added to it;
m) claims arising under a franchising agreement, as well as under
a B.C. Act, would be required to be brought in B.C. only;
n) an extra-provincial venue (somewhere other than B.C.) for
arbitrating a claim arising under a franchise agreement would be
o) a franchisee should not be able to claim damages for a loss
already recovered through a statutory rescission remedy (i.e. no
p) the presumption of deemed reliance of a franchisee on a
misrepresentation in a disclosure document or statement of material
change may be rebutted by proof that the franchisee actually knew
of the misrepresentation before signing a franchise agreement;
q) a prohibition on a franchisee waiving or releasing its
statutory rights would not apply to a post-dispute settlement
Once comments from interested parties have been taken into
account by the B.C. Institute, the B.C. Consultation Paper will be
submitted to the Legislature of the Province of British Columbia
for potential enactment. The Legislature of course will have the
power to make changes during the legislative process.
Closing Comments on B.C. Consultation Paper
The B.C. Consultation Paper presents a clear statement of what
potential franchise legislation in British Columbia should contain.
It is to be commended for its practical and cooperative approach to
existing franchise legislation in five other Canadian provinces. If
its tentative recommendations are adopted and enacted by the B.C.
Legislature, British Columbia will continue to assist with the
process of substantial uniformity of franchise legislation in
Written submissions regarding the B.C. Consultation Paper are
due by September 30, 2013 and may be sent to: email@example.com.
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