Franchisor’s obligation to disclose
5(1)A franchisor shall provide a prospective franchisee with a disclosure document, and the disclosure document shall be received by the prospective franchisee, not less than 14 days before the earlier of
(a)
the signing by the prospective franchisee of the franchise agreement or any other agreement relating to the franchise, and
(b)
the payment by or on behalf of the prospective franchisee to the franchisor or franchisor’s associate of any consideration relating to the franchise.
5(2)A disclosure document may be delivered personally, by registered mail or by any other prescribed method.
5(3)A disclosure document shall be one document delivered as required under subsections (1) and (2) as one document at one time.
5(4)The disclosure document shall contain
(a)
financial statements as prescribed,
(b)
copies of all proposed franchise agreements and other agreements relating to the franchise to be signed by the prospective franchisee,
(c)
statements, as prescribed, that are for the purpose of assisting the prospective franchisee in making informed investment decisions,
(d)
other information as prescribed, and
(e)
copies of other documents as prescribed.
5(5)In addition to the statements, documents and information required by subsection (4), the disclosure document shall contain all material facts.
5(6)The franchisor shall provide the prospective franchisee with a written statement of any material change, and the statement shall be received by the prospective franchisee, as soon as practicable after the change has occurred and before the earlier of
(a)
the signing by the prospective franchisee of the franchise agreement or any other agreement relating to the franchise, and
(b)
the payment by or on behalf of the prospective franchisee to the franchisor or franchisor’s associate of any consideration relating to the franchise.
5(7)All information in a disclosure document and a statement of material change shall be accurately, clearly and concisely set out.
5(8)This section does not apply to
(a)
the grant of a franchise by a franchisee if
(i)
the franchisee is not the franchisor, the franchisor’s associate or a director, officer or employee of the franchisor or of the franchisor’s associate,
(ii)
the grant of the franchise is for the franchisee’s own account,
(iii)
in the case of a master franchise, the entire franchise is granted, and
(iv)
the grant of the franchise is not effected by or through the franchisor,
(b)
the grant of a franchise to a person who has been an officer or director of the franchisor or of the franchisor’s associate for at least six months immediately before the grant of the franchise, for that person’s own account,
(c)
the grant of an additional franchise to an existing franchisee if that additional franchise is substantially the same as the existing franchise that the franchisee is operating and if there has been no material change since the existing franchise agreement or most recent renewal or extension of the existing franchise agreement was entered into,
(d)
the grant of a franchise by an executor, administrator, sheriff, receiver, trustee, trustee in bankruptcy or guardian on behalf of a person other than the franchisor or the estate of the franchisor,
(e)
the grant of a franchise to a person to sell goods or services within a business in which that person has an interest, if the sales arising from those goods or services, as anticipated by the parties or that should be anticipated by the parties at the time the franchise agreement is entered into, will not exceed 20% of the total sales of the business during the first year of operation of the franchise,
(f)
the renewal or extension of a franchise agreement if there has been no interruption in the operation of the business operated by the franchisee under the franchise agreement and there has been no material change since the franchise agreement or most recent renewal or extension of the franchise agreement was entered into,
(g)
the grant of a franchise if the prospective franchisee is required to make a total annual investment to acquire and operate the franchise in an amount that does not exceed the prescribed amount,
(h)
the grant of a franchise if the franchise agreement is not valid for longer than one year and does not involve the payment of a non-refundable fee and if the franchisor or franchisor’s associate provides location assistance to the franchisee, including securing retail outlets or accounts for the goods or services to be sold, offered for sale or distributed or securing locations or sites for vending machines, display racks or other product sales displays used by the franchisee, or
(i)
the grant of a franchise if the franchisor is governed by section 55 of the
Competition Act (Canada).
5(9)The Crown is not required to include the financial statements otherwise required by paragraph (4)(
a) in its disclosure document.
5(10)For the purposes of subparagraph (8)(
a)(iv), a grant is not effected by or through a franchisor merely because
(a)
the franchisor has a right, exercisable on reasonable grounds, to approve or disapprove the grant, or
(b)
a fee must be paid to the franchisor in an amount set out in the franchise agreement or in an amount that does not exceed the reasonable actual costs incurred by the franchisor to process the grant.
5(11)For the purposes of subsections (1) and (6), an agreement is not a franchise agreement or any other agreement relating to the franchise if the agreement only contains terms in respect of
(a)
keeping confidential or prohibiting the use of any information or material that may be provided to the prospective franchisee, or
(b)
designating a location, site or territory for a prospective franchisee.
5(12)Despite subsection (11), an agreement that only contains terms described in paragraph (11)(
a) or (
b) is a franchise agreement or any other agreement relating to the franchise for the purposes of subsections (1) and (6) if the agreement
(a)
requires keeping confidential or prohibits the use of information
(i)
that is or comes into the public domain without breaching the agreement,
(ii)
that is disclosed to any person without breaching the agreement, or
(iii)
that is disclosed with the consent of all the parties to the agreement, or
(b)
prohibits the disclosure of information to an organization of franchisees, to other franchisees of the same franchise system or to a franchisee’s professional advisers.
2007, c.F-23.5, s.5; 2014, c.58, s.2