Can a franchisor ask me to sign a confidentiality agreement before I receive its disclosure document?

A franchisor may ask for a confidentiality agreement before handing over detailed material. The disclosure statutes address this directly. In Ontario, British Columbia and Alberta, an agreement that contains only certain terms is not one of the signings that the disclosure document must reach you at least 14 days before. The terms are listed in each Act, and the Canadian Franchise Association notes that provincial franchise laws share many elements but differ in important ways.

What each Act says

Ontario’s Arthur Wishart Act, section 5(1.1), says the signing clause does not apply to an agreement that only contains terms requiring information to be kept confidential, prohibiting its use, or designating a location, site or territory. British Columbia’s section 5(11) uses similar words. Alberta’s section 4(7) says an agreement containing only terms about a fully refundable deposit, confidentiality or use, or a location or territory is not a franchise agreement for the signing deadline. Other provinces with franchise laws, including Saskatchewan, are not covered here, so read the Act that applies to you.

Where the carve-out ends

Ontario’s section 5(1.2) and British Columbia’s section 5(12) pull the agreement back in if it requires keeping confidential, or bars the use of, information that is or comes into the public domain, or is disclosed to any person, other than by a breach of the agreement, or is disclosed with the consent of all the parties. They also pull it back in if it prohibits disclosure to an organization of franchisees, other franchisees of the same system or your professional advisors. Check that you may show the agreement and the document to your lawyer and accountant.

What it does not change

A carved-out agreement does not remove the franchisor’s duty to provide the disclosure document, which is subject to the exemptions each Act lists (in Ontario, section 5(7)). In Ontario the document must still arrive at least 14 days before the earlier of signing the franchise agreement or any other agreement relating to the franchise, or paying any consideration relating to it, apart from a deposit that meets the Act’s conditions. These sections concern delivery of the document to you, so ask the franchisor for it in writing. Any other term in the agreement, such as a fee or an obligation to proceed, means you should read the whole text against the Act with a lawyer first.