The Environment and Franchising

NUMBER 1-2 -  OCTOBER 12TH, 2007 

QUESTION CORNER

Question from a franchisor: I heard about a law on the environment in Quebec that provides for the payment of dues by franchisors from Quebec and other Canadian provinces. What is the objective of this law and what are the implications for franchisors across Canada?

Answer: You are referring to the “Environment Quality Act” amended in 2002 (the “Act”) and to the “Regulations on the compensation for municipal services supplied to insure the recycling and the valorization of residual matters” adopted in 2005 (the Regulations”) for which the Fees Schedule was adopted by the National Assembly in February 2007 (collectively the “Laws”). The Act puts in place an obligation on behalf of certain persons to contribute up to 50% of the net costs of municipal curbside recycling programs. A similar Act already exists in Ontario. Manitoba is in the process of adopting a similar Act.

In general, the Laws apply to companies and organizations that own a brand, a name or a distinguishing guise (“Brand Owners”) that import, manufacture, distribute and/or sell products or services that generate containers, packaging or printed matter in Quebec. It also applies to distributors of these products from outside of Quebec that have a domicile, an establishment or a group of retailers in the province. When the Brand Owners do not have an establishment in Quebec, it is the “first supplier in Quebec” that the Laws applies to, usually the distributor (ex. franchisors) or the retailer (ex. franchisees).

The Brand Owners subject to this Law must register with Eco Entreprises Québec (“EEQ”), fill out a declaration form and pay the applicable contribution.

EEQ is the entity that is entitled to represent companies required to pay compensation to the recycling of containers, packaging and printed matter. As of the date hereof, almost 3000 companies have registered with EEQ of which 1800 have submitted their 2005 and 2006 declarations. The deadline for registering with the EEQ was June 13, 2007 and the deadline for the payment of the contributions, before interest is applied, was July 13, 2007.

Manufacturers, distributors and retailers that are not registered or are not certain that they are subject to the contribution may consult the EEQ Internet site at www.ecoentreprises.qc.ca for further details on the subject and to register and fill out the declaration form, if applicable.

There are penalties that apply to Brand Owners that do not pay the contribution before the deadline for payment.

Cordially,

Claude J. Pellan, Attorney and Consultant
Franchise and Business Law
www.claudepellan.com

N.B. I expect the next question I will receive from franchisors is whether or not they have the right to pass down the contribution to retailers (ex. franchisees) and, if yes, how.