Dealership and distributorship (franchise definition)

Dealers and distributors meet this term when a supplier relationship may turn out to be a franchise under a provincial Act, which brings disclosure duties with it. The Acts test the arrangement, not the label. See which provinces have franchise disclosure laws.

The Ontario and British Columbia test

Both start from a right to engage in a business where the franchisee must make payments to the franchisor or its associate. The distribution limb then asks for two things: the franchisor or its associate grants representational or distribution rights to sell or distribute goods or services supplied by the franchisor or a supplier it designates, whether or not a trademark is involved, and it or a designated third person provides location assistance, such as securing retail outlets or accounts. Alberta’s s. 1(1)(d) instead requires, among other things, a marketing or business plan prescribed in substantial part by the franchisor or its associate and a business substantially associated with a trademark, service mark, trade name, logotype or advertising of the franchisor or its associate. Each Act also lists arrangements it does not apply to; Ontario’s and British Columbia’s lists are in s. 2(3).

What to check

• Whether payments flow to the supplier or its associate, direct or indirect
• Whether the supplier or a designated supplier provides the goods
• Whether anyone helps secure outlets or accounts
• Which province’s Act applies, compared with the statutory definition