Can I franchise my own business in Canada, and what does the law require?

Whether your arrangement counts as a franchise is set by the definitions in provincial law. This page describes Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 in most detail, then the disclosure timing in the Alberta, British Columbia, Manitoba, New Brunswick and Prince Edward Island Acts, and the federal Trademarks Act. It does not cover other provinces, and nothing here says whether franchising suits your business. If you want the buyer’s side, see buying a franchise in Canada.

What makes an arrangement a franchise in Ontario

Section 1(1) of the Arthur Wishart Act defines a franchise as a right to engage in a business where the franchisee is required by contract or otherwise to make a payment or continuing payments, direct or indirect, to the franchisor or its associate, and either of two things is also true. The first is that the goods or services are substantially associated with a trade-mark, trade name or logo owned by or licensed to the franchisor, and the franchisor or its associate has the right to exercise or exercises significant control over, or has the right to provide or provides significant assistance in, the franchisee’s method of operation. The second is that the franchisee gets representational or distribution rights for goods or services supplied by the franchisor or its designated supplier, and the franchisor, its associate or a third person it designates provides location assistance. Section 2(3) lists arrangements the Act does not apply to, including employer-employee relationships, partnerships and some single-licensee trademark licences.

Disclosure before the franchisee signs or pays

Ontario’s Act requires the franchisor to provide a disclosure document, received not less than 14 days before the earlier of signing the franchise agreement or any other agreement relating to the franchise, or paying consideration, subject to the exceptions and exemptions in the Act. The Alberta, British Columbia, Manitoba, New Brunswick and Prince Edward Island Acts each set a 14-day minimum as well, with their own exceptions. In Ontario, the document must be one document delivered at one time. It must contain all material facts, prescribed financial statements and copies of the proposed agreements, and a written statement of any material change must follow.

What happens if the rules are missed

Under section 6 of the Ontario Act, a franchisee may rescind within 60 days after receiving the disclosure document if it, or a statement of material change, was late or the disclosure document was deficient, or within two years of entering the agreement if none was ever provided. Section 3 also says every franchise agreement imposes on each party a duty of fair dealing in its performance and enforcement, which includes the duty to act in good faith and in accordance with reasonable commercial standards.

The trademark connection

For the purposes of that Act, section 50(1) of the federal Trademarks Act treats a licensee’s use of a trademark as the owner’s use where the owner has, under the licence, direct or indirect control of the character or quality of the goods or services. The Canadian Intellectual Property Office says registering a trademark gives you legal title to it. Ask a lawyer who owns and has registered your marks before you license them.