Franchise legislation in Canada
NUMBER 10 – January 25, 2008
Question from a franchisor (U.S.A.): I am a franchisor that operates a franchise network of 400 franchisees throughout the northeastern United States. Would you kindly provide me with information on franchise legislation applicable in Canada?
Answer: As you know, Canada is divided into ten (10) provinces. According to the Canadian Constitution, each province has the power to adopt legislation on franchising. Over time, there are certain provinces that have adopted specific legislation on franchising and others that have not. Over recent years, more and more provinces have adopted a law on franchises. I expect this trend to continue.
The provinces of Alberta, Ontario and Prince Edward Island have the following legislation on franchising:
Ontario: Arthur Wishart Act and regulations
Alberta: Franchises Act and regulations
Prince Edward Island: Franchises Act and regulations
The province of New Brunswick has adopted the Franchises Act, but it will not be in full force and effect until the regulations are adopted (probably some time this year).
Provinces with franchise legislation require franchisors provide prospective franchisees with a Disclosure Document, a watered down version of the contents of the “UFOC” (Uniform Franchise Offering Circular), the document that franchisors in the United States must provide prospective franchisees.
Of interest is the fact that franchise legislation in Canada provides that a franchisor from another jurisdiction (ex. United States) that requires a franchisor provide a similar document to prospective franchisees is permitted use that document in Canada, as long as it contains all information required in the franchise legislation of the concerned province.
It is also interesting to note that the Uniform Law Conference of Canada has prepared a law entitled the “Uniform Franchises Act” (and its regulations) on Disclosure Documents. Provinces have the choice of adopting this act as being their own, of adopting an amended version of the act or of drafting and adopting their own legislation on franchising.
In the other provinces (except Quebec), a system of common law exists (judgements by the courts) and applies to commercial relationships.
In Quebec, the legislative provisions contained in the Quebec Civil Code (law written by the legislator) apply to commercial relationships. The principal ones that have been applied to franchising are the contract of adhesion (a contract in which the essential stipulations are imposed), the implicit obligations of contracting parties and the obligation of parties to act in good faith.
There is also the Charter of the French Language and it regulations, which oblige parties to draft contracts in French only. This is because French is the principal language in the province of Quebec. However, parties may opt out of this obligation by a written provision to that effect in the contract.
There are also other provincial and federal laws and regulations that apply to other areas that touch franchising (intellectual property, competition, consumer protection, bulk sales, publicity, securities, registration of companies, personal information, etc.).
I trust this summary of franchise legislation applicable in Canada is satisfactory.
Cordially,
