Franchise disclosure exemptions

A resale is one place a buyer meets these. Under s. 5(7)(a), the disclosure rule in s. 5 does not apply to a grant by a franchisee if all four conditions hold: the franchisee is not the franchisor, an associate, or a director, officer or employee of either; the grant is for the franchisee’s own account; in a master franchise the entire franchise is granted; and the grant is not effected by or through the franchisor.

Approval does not defeat the exemption by itself

Section 5(8) says a grant is not effected by or through the franchisor merely because the franchisor may approve or disapprove it on reasonable grounds, or because a transfer fee within the limits of s. 5(8)(b) must be paid.

Other exemptions and how to check

• An additional franchise to an existing franchisee that is substantially the same, with no material change (s. 5(7)(c))
• A renewal or extension with no interruption in the business and no material change (s. 5(7)(f))
• A grant by an executor, administrator, sheriff, receiver, trustee, trustee in bankruptcy or guardian on behalf of someone other than the franchisor or its estate (s. 5(7)(d))
• Grants where the required total initial investment does not exceed one prescribed amount, or is greater than another (s. 5(7)(g)(i) and (h); the amounts are set in O. Reg. 581/00, s. 9)

Under s. 12, in a proceeding under the Act, the person claiming an exemption must prove it. British Columbia’s Franchises Act lists its own exemptions in s. 5(8); confirm the list for the province that applies. See also the Arthur Wishart Act.