Material change (franchise)
In Ontario’s Arthur Wishart Act, a material change is a change in the business, operations, capital or control of the franchisor or its associate, a change in the franchise system, or a prescribed change, that would reasonably be expected to have a significant adverse effect on the franchise’s value or price, or on the decision to acquire it.
A disclosure document describes the franchise as it stands on one date. A material change is one that occurs afterwards, so the Act requires a separate written statement of it.
What the franchisor must do
Under s. 5(5) of the Act, the franchisor provides a written statement of the change, and the franchisee must receive it as soon as practicable after the change and before the earlier of signing an agreement relating to the franchise or paying consideration (a qualifying refundable deposit aside). O. Reg. 581/00 requires the statement to carry its own certificate, as with the certificate of the franchisor.
What follows if it is missed
Section 6(1) lets a franchisee rescind, within the period it sets, if a statement of material change was not provided within the time required, and s. 7 gives a right of action for damages for a misrepresentation in the statement or a failure to comply with s. 5. British Columbia’s Franchises Act defines the term in s. 1 in similar words and sets the duty in s. 5(6). Ask for any statements of material change issued since the disclosure document. Related: franchise disclosure exemptions.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Government of OntarioGovernmentArthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3
- 02Government of British ColumbiaGovernmentFranchises Act, S.B.C. 2015, c. 35
- 03Government of OntarioGovernmentO. Reg. 581/00: GENERAL
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