Franchise Law Update. LSUC 7 th Annual Business Law Summit, May 11, 2017 Peter Viitre

Transcription

1 Franchise Law Update LSUC 7 th Annual Business Law Summit, May 11, 2017 Peter Viitre

2 Agenda Franchise Legislation BC Franchises Act Wishart Act Amendments Electronic Disclosure Business Law Advisory Council Industry Regulation Healthy Menu Choices Act, 2015 Ministry of Labour Changing Workplaces Review Jurisprudence Raibex

3 Franchise Legislation BC Franchises Act Basic elements similar to Wishart Act, but: Substantial Compliance is acceptable Wrappers are allowed NDAs and Location Agreements can be entered into before delivering FDD or during 14-day interim period Fully refundable Deposits, not exceeding 20% of initial franchise fee, can be taken before delivering FDD or during 14-day interim period

4 Franchise Legislation Electronic Disclosure Amendment in force July 1, 2016 Electronic delivery of FDD permitted if: The document is delivered in a form that enables the recipient to view, store, retrieve and print it The document contains no links to external documents or content The document contains an index for each separate electronic file, if any, of which the document consists The franchisor receives a written acknowledgement of receipt from the prospective franchisee

5 Franchise Legislation Business Law Advisory Council ( BLAC ) Mandate is to recommend changes to Ontario s corporate and commercial legislation in order to make Ontario a more business-friendly jurisdiction and to strengthen Ontario s competitive advantage in the global economy. Wishart Act amendments are being done in two phases the first, being mostly technical amendments to promote certainty, and the second, being more substantive changes to modernize the way franchise law is practiced in Ontario

6 Franchise Legislation BLAC Round 1 Bill expected Spring, 2017 NDAs, location agreements and refundable deposits Geographical scope of single license exemption is all of Canada Director/officer exemption ends 4 months after individual ceases to be director/officer Time for calculating sales for fractional franchise exemption is first year of operation Relevant investment amount for de minimis and large investment exemptions is total initial investment US GAAP, GAAS and IFRS deemed acceptable (amended regulation to follow)

7 Franchise Legislation BLAC Round 2 Fall 2017/Spring 2018 Under consideration and subject to consultation: Substantial Compliance Finite list of material facts to be included in FDD subject to antifraud requirements Purchase of reasonable amount of inventory at bona fide wholesale prices not payment Franchisor can use parent company s financials if parent company guarantees franchisor s obligations Reverse Midas extra-provincial application Amending rescission payment provisions to net out franchisee profits

8 Industry Regulation Healthy Menu Choices Act, 2015 In force January 1, 2017 Restaurant chains with 20 or more locations must show calorie counts on their menus for standard items and portions Detailed rules Hefty fines Potential franchisor liability

9 Industry Regulation Changing Workplaces Review Possible changes to Employment Standards Act, 2000 and Labour Relations Act, 1995 Goal is to improve security and opportunity for vulnerable workers in Ontario ESA non-compliance in non-unionized workplaces, including franchises Possible joint employer status for franchisors

10 Jurisprudence Raibex Canada Ltd. v. ASWR Franchising Corp. Rescission claim based on the fact the Franchisor s FDD did not include head lease since location not yet determined Court ruled in favour of franchisee: Head Lease was required Fact that it didn t yet exist was no excuse premature disclosure Appeal heard May 1, 2017

11 Questions? Thank You!