In Québec, franchisors often lease or sublease premises
to their franchisees in order to retain control over the conduct of
operations by the latter. In such instances, franchisors and
franchisees will enter into a franchise agreement and a separate
lease or sublease agreement, both of which provide a different set
of obligations to which the parties are bound. Although the
agreements are entered into and negotiated separately, what are the
obligations resulting from a franchise agreement that may affect a
This question was recently analyzed in the Québec case
9103-1658 Québec Inc. c. Café Vienne
Canada Inc.1 The Superior Court found that the
franchise agreement imposes on the franchisor a duty to inform the
franchisee of issues relating to the renewal of the lease of the
premises occupied by the franchisee, as well as a duty to take
reasonable means to prudently and diligently renew said lease if
requested by the franchisee.
The facts of the case are as follows: the franchisor entered
into a franchise agreement with the franchisee, whereby the
franchisee had an option to renew the agreement. Simultaneously,
the franchisee entered into a sublease agreement with the
sublessor, a member of the franchisor's group who had entered
into the main lease with the landlord. Following the termination of
the main lease due to a stalemate in the negotiation process, the
franchisee sued the sublessor and the franchisor on the grounds
that they had been negligent during the negotiation process and
that they had failed to adequately inform and protect the interest
of the franchisee in the main lease.
The Court found that the franchisor and the sublessor did not
fulfil their duty to inform the franchisee by failing to advise him
of the progress and outcome of the negotiations, of the
landlord's position and of the delay to accept the terms and
conditions offered by the landlord.
In this case, the Court clearly stated that the duties of
information and diligence to which the franchisor is bound arise
from the franchise agreement and not from the sublease agreement.
In fact, the franchise agreement contains the following clause
relating to the franchisee's renewal option:
"4.a)iii) the franchisor or
the franchisee may renew the lease of the premises during the
The sublessor and the franchisor's obligation to negotiate
the renewal of the main lease results from this provision and not
from the sublease agreement. However, the Court stated that, in
this context, the franchise agreement and the sublease agreement
are intrinsically related and cannot exist independently.
Therefore, in the context of a leasing transaction in
Québec, we are of the opinion that franchisors must be aware
of the obligations imposed upon them by the franchise agreement,
since they may be more onerous than the obligations set out in the
lease or sublease agreement. As to franchisees, they must always
ensure that the franchise agreement references the lease or
sublease agreement in order to ensure that their rights as lessees
or sublessees are enforceable against the franchisor.
1. 2014 QCCS 518.
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