What the law says about registering a franchise in Ontario
While there is no requirement to register your franchise in Ontario, franchises operating in Ontario must comply with applicable legislation and regulations. The applicable act is the Arthur Wishart Act (Franchise Disclosure) 2000. The Act and its regulations govern how franchisors must present their franchised business to prospective franchisees and the information that must be provided to them at the outset as well as the time line for providing this information. The key document is the Disclosure Document.
What is the Disclosure Document?
The disclosure document must contain all material facts about the franchise business, all required documentation such as copies of the franchise agreement, and other agreements relating to the franchise, and prescribed statements and information.
Delivery of the disclosure document
The timing for the delivery of the disclosure document to a prospective franchisee is important. The franchisor must provide a copy of the disclosure document to a prospective franchise at least 14 days prior to the franchisee signing the franchise agreement or any other agreement related to the franchise and paying the franchise fee or making any other payments to the franchisor. It must be delivered personally, by registered mail or as otherwise prescribed by the Act.
Compliance of the disclosure document with the Act
If the disclosure document does not comply with the Act and its regulations, the prospective franchise has the right to terminate the franchise agreement without penalty or obligation up to 60 days from the day that it received the disclosure document and up to two years if the franchisor never provided a disclosure document. The contents of the disclosure document are very important and must be complied with in their entirety.
Right to terminate a franchise agreement
If a franchisee exercises its right to terminate the franchise agreement, the franchisor must refund the franchise fee and any other fees paid under the franchise agreement and must purchase all equipment, supplies and inventory that the franchisee was obligated to purchase under the franchise agreement.In addition, if the franchisee suffers a loss because of the franchisor’s disclosure obligations, the franchisee may bring a claim against the franchisor and any of its agents or associates.
If you own a franchise, are thinking of purchasing or selling franchise, or are trying to bring a US franchise to Ontario, please contact us to discuss.