There is a growing number of Canadian provinces enacting franchise disclosure legislation and a growing number of decided cases providing guidance as to the obligations of franchisors under these statutes. Currently, the provinces of Alberta, Manitoba, Ontario, Prince Edward Island and New Brunswick have such legislation. These statutes are consistent in requiring the delivery of a comprehensive franchise disclosure document before a prospective franchisee pays any money or enters into an agreement relating to the franchise.
The court decisions to date have demonstrated a clear judicial predisposition to a strict interpretation of the wording of the statutes and a willingness to afford aggrieved franchisees their requested remedies.
All of these statutes provide for the significant remedy of rescission for non-disclosure or sufficiently defective disclosure. The courts have also demonstrated a willingness to find sufficient defects to support a rescission remedy even from minor administrative errors.
There is a growing body of legal literature discussing many aspects of franchise disclosure legislation in Canada. However, what is missing is a concise summary of some of the key areas of the disclosure process which, if not handled properly, can lead to devastating and unexpected consequences.