Franchise (statutory definition)

Whether a deal counts as a franchise is the first step in deciding whether a provincial disclosure Act applies; Ontario’s s. 2(3) also lists relationships, such as employment and partnership, that the Act does not apply to. Ontario’s Arthur Wishart Act, s. 1(1), starts from a right to engage in a business where the franchisee must make a payment or continuing payments to the franchisor or its associate. It then needs either a trade-mark limb, with the franchisor or its associate exercising, or having the right to exercise, significant control over the franchisee’s method of operation, or providing, or having the right to provide, significant assistance in it; or a distribution limb, with location assistance from the franchisor, its associate or a third person it designates.

How Alberta words it

Alberta’s Franchises Act, s. 1, asks three things instead: goods or services sold under a marketing or business plan prescribed in substantial part by the franchisor, substantial association with its trademark or trade name, and either a continuing financial obligation with significant continuing operational controls or the payment of a franchise fee. It includes a master franchise and a subfranchise. The Canadian Franchise Association notes that disclosure is regulated provincially, not through one national law.

What to check or ask

• Which province’s Act covers the location, and how that Act defines a franchise
• Whether payments flow to the franchisor or its associate, and under what label
• Whether the franchisor controls or assists the method of operation
• Whether a disclosure exemption applies even if the deal is a franchise

Which provinces have franchise disclosure laws lists the regimes.