The British Columbia Law Institute ("BCLI") has issued a Consultation Paper on a Franchise Act for British Columbia (the "Consultation Paper") for the purpose of making a recommendation to the Government of the Province of British Columbia to enact franchise legislation in that province. In the Consultation Paper, the BCLI has recommended that British Columbia should enact franchise legislation similar to the legislation already in force in five other Canadian provinces: Alberta, Ontario, New Brunswick, Prince Edward Island and Manitoba. The possibility of British Columbia legislation is a significant development for franchisors with existing franchisees in the province, or franchisors who intend to develop franchises there. The BCLI has invited comments from all affected sectors, including franchisors, with respect to the recommendations made in the Consultation Paper. A copy of the Consultation Paper can be found here. Responses to the Consultation Paper can be sent to the BCLI in one of three ways:

By Mail: British Columbia Law Institute, 1822 East Mall, University of British Columbia, Vancouver, BC, Canada, V6T 1Z1
By Fax: (604) 822-0144
By Email: gblue@bcli.org

Responses must be received by September 30, 2013.

The Consultation Paper's main recommendations are as follows:

  • British Columbia legislation should be generally harmonized with other Canadian legislation;
  • Disclosure documents should be valid if they are in substantial compliance with the legislation and regulations, and minor defects should not lead to a rescission right by franchisees;
  • Fully refundable deposits prior to disclosure should be permissible;
  • Franchisors should be required to state in the disclosure document whether or not exclusive territory will be granted under the franchise being offered;
  • If a franchisor intends to reserve the right to sell goods and services directly and in competition with its franchisees, this should be declared in the disclosure document;
  • Delivery of a disclosure document by electronic means such as e-mail, or delivery of a disclosure document in machine-readable form (such as a DVD disk), should be expressly permitted;
  • A franchisee's statutory right to sue for misrepresentation should extend to misleading statements made in a financial projection supplied by the franchisor before a franchise agreement is signed, unless the projection contains cautionary language similar to that required by securities legislation in forward-looking statements;
  • "Wrap-Around" disclosure documents should be permissible;
  • The legislation should contain statutory language that forces all litigation concerning the franchise (including arbitrations), whether statutory or otherwise, to take place in British Columbia in order to prevent the potential splitting of cases;
  • Exercising the statutory right of rescission under the legislation should not bar the franchisee from also pursuing a statutory right to damages, provided that there is no double recovery;
  • The statutory presumption of deemed reliance in respect of statutory misrepresentations should operate conclusively, except where the franchisee had actual knowledge of the falsity of the misrepresentation prior to entering into the franchise agreement; and
  • The statutory bar to waiving or releasing a right under the legislation should not prevent a waiver or release that is part of a post-dispute settlement.

Although the legislative process is still many months away, the BCLI's process will provide you with an opportunity to make your voice heard on this important development in Canadian franchise law.

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.