The world is undergoing an unprecedented economic crisis for
this generation. Like all businesses, franchisors are watching
events unfold, with a feeling that there is little they can do to
turn the tide.
Franchisors who have previously been through tough economic
times know that the franchising industry has proven itself to be
surprisingly counter-cyclical, as more and more laid off employees
look to the acquisition of franchises as their next career move.
Some are disillusioned with the relative risk of being an employee,
while others have a severance package that they end up using to buy
a franchise. As many of these people have never owned their own
businesses, they are interested in being in business for
themselves, but not by themselves, which is what the franchise
business opportunity model is meant to offer.
But instead of sitting on the sidelines, there are some
proactive measures a franchisor should consider as events unfold to
reduce the risk of claims from franchisees down the road. For
instance, does their current franchise disclosure document disclose
"all material facts," as it is supposed to under Canadian
franchise laws, at the time it is handed out? Specifically, are
there new material facts that need to be incorporated into the
franchise disclosure document that comment on and update the
economic forecast for their industry? While the entire economy is
suffering, there are specific sectors that may face greater
pressures. In addition, there may be information that is not easily
available about a specific industry that a franchisor should be
sure is placed before a prospect.
Franchisors should therefore take a serious look at their
current franchise disclosure documents so as to consider the
changes now necessary to reflect current economic conditions, and
thus reduce the risk of a claim from a franchisee at some later
time based on a failure to disclose a material fact.
Franchisors who have already provided disclosure to a prospect,
but not yet signed a franchise agreement with that prospect, should
recall their continuing disclosure obligation under Canadian
franchise law to update a prospect regarding any material adverse
change. That should be done right away.
Franchisors who are proactive in dealing with their disclosure
obligations are ones who will likely find fewer legal claims down
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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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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