Franchises are sometimes presented under the guise of trademark
license agreements in an attempt to avoid the requirements of the
Arthur Wishart Act, which protects franchisees by imposing
strict disclosure obligations on franchisors and giving rescission
rights to franchisees where the franchisor fails to meet these
But sometimes, a trademark license is just a trademark
In MGDC Management Group v. Marilyn Monroe Estate, 2014
ONSC 4584 (S.C.J.), the Respondents licensed the trademarked name
Marilyn Monroe to the Applicants for use in their restaurants. The
Respondents claimed that the agreement was in reality a franchise
agreement and sought rescission of the license agreement, as well
The court agreed that the substance of the agreement, rather
than the form, was key to determining whether the Act
applied. It examined the relationship between the parties and
considered whether other hallmarks of a franchise agreement were
present, such as significant control or significant assistance by
the (supposed) franchisor of the (supposed) franchisee's method
of operating its business. A trademark license alone, while
being a common element of a franchise agreement, is not enough to
establish a franchise. In fact, the Act specifically states
that it does not apply to a single license for a trademark, logo,
or other commercial symbol.
In this case, there was no evidence that the Respondents used
their contractual rights under the License Agreement dictate to the
Applicants how to design or run their business. The Respondents did
not create the Applicants' restaurant, did not assist them in
operating it, and did not supply goods or services to it. The
License Agreement provided that the Applicants were responsible for
developing the restaurant business, including creating the
décor and colour scheme, creating the food and beverage
products, promoting the business, and choosing its
franchisees. The Respondents' rights under the agreement
were limited to the protection of the integrity of their
The decision highlights the elements that a court may look at in
order to determine whether a relationship constitutes a franchise.
If any of these elements are present in a proposed agreement, the
potential franchisor should consider whether the Arthur Wishart
Act applies prior to executing any agreement.
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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