The offer and sale of franchises in Canada is regulated by the provinces rather than by the federal government. Definitive franchise legislation is currently in force in only five Canadian provinces: Alberta, Ontario, Manitoba, New Brunswick (NB) and Prince Edward Island (PEI). In addition, the Civil Code of Quebec contains provisions applicable to all contracts governed by Quebec law, including franchise agreements.  There is no government agency which enforces the franchise regulations.  Obligations are typically enforced by the affected parties rather than by government agencies as the interests are generally considered to be private rather than public.

 

The Franchise Acts in Alberta, Ontario, Manitoba, NB and PEI (the Canadian Franchise Acts) set forth a number of requirements governing the relationship between a franchisor and a franchisee, the principal ones being the duty of fair dealing imposed upon the parties in respect of their performance of the franchise agreement, the obligation of franchisors to disclose material and prescribed information to prospective franchisees in compliance with the relevant statutory and regulatory scheme, and the statutory right of franchisees to associate with each other and form an organisation.

 

Under the Canadian Franchise Acts, a disclosure document must be delivered to a prospective franchisee at least 14 days prior to the signing by the prospective franchisee of the franchise agreement or any agreement relating to the franchise or the payment of any consideration.  Information to be included in the disclosure document includes the history of the franchisor, the business background of its directors, the general partners and the officers of the franchisor, and whether any of those persons has been subject to bankruptcy or insolvency proceedings or has been previously convicted of fraud or unfair or deceptive business practices.

 

Except for compliance with applicable Canadian Franchise Acts and other legislation, there are no other requirements that must be met before a franchisor may offer franchises.

 

Each of the Canadian Franchise Acts imposes the obligation to disclose upon ‘franchisors’, the definition of which includes a sub-franchisor with regard to its relationship with a sub-franchisee. Accordingly, pre-sale disclosures must be made to a sub-franchisee by the subfranchisor in accordance with the same procedural and substantive requirements, and exemptions pertaining thereto, that apply to franchisors with regard to their relationships with their franchisees.

 

In Quebec, franchise agreements are governed by the general principles of contract formation found in the Civil Code of Quebec and are generally regarded as contracts of adhesion.  The civil law applicable in the province of Quebec does contain general principles applicable to all contracts. The Civil Code of Quebec establishes that the duty of the parties to conduct themselves in good faith also extends to pre-contractual negotiations and has generally been interpreted as imposing a positive obligation to inform the opposing party of any information which could affect its decision to enter into the contract.

There are no restrictions apply in any of the other Canadian provinces or territories (namely, British Columbia, Saskatchewan, Nova Scotia, Newfoundland, Yukon, Northwest Territories and Nunavut).