Articles - Focus on Franchising

The Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (“AWA”) came into force on December 15, 2009. The AWA provides certain inalterable rights and duties in the relationship between a franchisor and franchisee. These duties have been the subject of considerable litigation. However, there has been little discussion around the circumstances in which the AWA will not apply.

In 2176693 Ontario Ltd. v. Cora Franchise Group Inc., the Ontario Court of Appeal addressed the issues of the enforceability of a franchise agreement clause which purported to require the franchisee to provide a general release to the franchisor and the application of the doctrine of severability in the context of the Arthur Wishart Act (“AWA”).

After much anticipation, the Quebec Court of Appeal released its decision in Dunkin’ Brands Ltd. c. Bertico inc., 2015 QCCA 624, on April 15, 2015.

The obligation to disclose does not end with the delivery of a disclosure document.

The decision of the Supreme Court of Canada in Bhasin v. Hrynew, 2014 SCC 71, which was released on November 13, 2014, deals with the common law duty to perform contracts honestly. It also provides a thorough and reasoned examination of the development of the good faith principle in Anglo-Canadian contract law and will likely be seen as a seminal decision in this area.

If a franchisee does not receive a disclosure document fourteen days prior to paying any money to a franchisor or signing a franchise agreement, it is entitled to rescind its franchise agreement under section 6(2) of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000 c.3.

Despite a franchisor's best efforts, litigation may be unavoidable in the operation of a franchised system. This article discusses best practices in managing litigation resultant from operating a franchised system.

Franchising owes much of its success to the nature of the relationship between franchisor and franchisee. The essence of that relationship is that the franchisor and the franchisee are independent contractors, with separate and distinct obligations, premised on the franchisee having the opportunity to operate, and profit from, its own independent business.

An “earnings claim” is any information given by or on behalf of a franchisor to a prospective franchisee from which a specific level or range of actual or potential sales, costs, income or profit of franchisor-owned or franchised outlets may be readily ascertained. Every North American jurisdiction that regulates franchise sales also regulates the use of earnings claims, although some of them use different terms for "earnings claims".

Franchise pundits will tell you that 50 cents of every dollar spent in a retail outlet is spent at a franchised business.