NEWS RELEASE. New rules increase transparency and protections for franchisees

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1 For Immediate Release 2017SBRT Feb. 1, 2017 NEWS RELEASE Ministry of Small Business and Red Tape Reduction and Responsible for the Liquor Distribution Branch New rules increase transparency and protections for franchisees VICTORIA The new Franchises Act and regulation taking effect today ensure prospective business owners in British Columbia will have more information available to help them decide whether to open a franchised business. The act increases transparency for new franchisees by requiring franchisors to disclose important information about the company s legal, financial and bankruptcy history. The act also provides new legal protections for B.C.-based franchisees including: requiring that contracts include pre-sale information disclosure requirements; providing legal rights and protections to help parties to resolve disputes; requiring disputes be heard in B.C.; providing franchisees with the ability to sue for damages in court in cases where the franchise agreement is not honoured or the franchisee does not receive the required disclosure information; and allowing franchisees to cancel the franchise agreement and request their money back if the disclosure document was not provided to them as required. The act outlines remedies in the event a potential franchisee is misled about potential profits through the disclosure documents by providing a time frame which a franchisee may rescind a franchise agreement, without penalty or obligation. The legislation provides certainty for businesses which will help new franchises open in B.C., generating investment and employment opportunities and providing direct and indirect economic benefits to communities. The Province has created resource materials to help franchisees understand the new legislation and made the following materials available in Chinese (simplified and traditional), Punjabi and Korean: a checklist with a high-level overview of steps required to enter into a franchise agreement; a questions to ask sheet prompting franchisees to seek specific information during discussions with franchisors; and an easy-to-read summary of the key points of the new Franchises Act. The Franchises Act and regulation were developed with input from key stakeholders throughout the province to ensure it meets the specific needs of franchisees and franchisors in British Columbia, while harmonizing B.C. s laws with the five other provinces with franchise regulations (Alberta, Manitoba, Ontario, New Brunswick and Prince Edward Island) to reduce red tape and costs associated with disclosure documents and bring consistency for franchisors

2 across Canada. Quotes: Coralee Oakes, Minister of Small Business and Red Tape Reduction The Franchise Act and regulation include important requirements for information disclosure and protections for entrepreneurs interested in starting a franchise in B.C. With this change, we re formalizing processes already in use by many franchisors as well as encouraging economic growth in communities throughout the province. Kathleen Cunningham, executive director, BC Law Institute The Franchises Act overcomes much of the inherent power imbalance in the franchise relationship and creates a more even playing field. It benefits franchisors and franchisees alike in creating much-needed certainty around the standard of pre-contract disclosure. The Institute is very pleased that B.C. has become the sixth province to enact legislation reflecting best practices in franchising along the lines of the national model developed by the Uniform Law Conference of Canada. Robin Burnette, CEO, Stickys Candy Holdings It's wonderful B.C. has created the Franchise Act to save franchisors time and money by aligning with other provincial franchise laws. The act also makes it easier for franchisors to find the best possible people to represent their business by clarifying the information requirements at the outset. Quick Facts: The Franchises Act was first introduced in the legislature in October 2015 to increase transparency in B.C. s franchise industry. A franchise is a business in which one party (the franchisor) grants to the other party (the franchisee), the right to market goods or services under the franchisor s business system or trade name, in return for fees and royalties. Commonly franchised businesses include restaurants, oil change businesses, coffee shops, hotels and cleaning services. This legislation aims to make investing in B.C. even easier and protect British Columbians who are buying into a franchised business. There are nearly 78,000 franchised outlets in Canada with $100 billion in annual sales, and Canadian franchises employ about 1.5 million people one of every 22 people in Canada. Learn More: Starting a Franchise in British Columbia: Franchisee checklist: Franchises Act questions and answers: Franchisee questions to ask:

3 A backgrounder follows. Media Contact: Government Communications and Public Engagement Ministry of Small Business and Red Tape Reduction and Responsible for the Liquor Distribution Branch Connect with the Province of B.C. at:

4 For Immediate Release 2017SBRT Feb. 1, 2017 BACKGROUNDER Ministry of Small Business and Red Tape Reduction and Responsible for the Liquor Distribution Branch Franchise Act and regulations Key benefits for British Columbia s business community: The act governs franchised businesses in B.C., providing important legal protections for B.C.-based franchise operators and simplifying investing in B.C. The act will harmonize B.C. s process with other jurisdictions and reduce costs associated with disclosure documents. This franchise legislation is consistent with the approach taken in other provinces across Canada, including Alberta, Manitoba, Ontario, New Brunswick and Prince Edward Island. Uniform legislation provides a higher degree of certainty to both franchisors and franchisees and standardizes practices already followed by most large reputable franchisors. Benefits for franchisees: The act ensures franchisees will receive all the information they need to decide whether to invest in a business before signing franchise agreements. They will also have remedies if information is not disclosed, or if they are misled about potential profits or other information about the franchise. Furthermore, the act: regulates the sale of franchises requires that contracts include pre-sale disclosure requirements provides legal rights and protections to help parties to resolve disputes Benefits for franchisors: The legislation provides franchisors with uniformity in their disclosure requirements which means they will know exactly what they need to share with their potential franchisees because it follows the uniform model of legislation. By creating legislation that is similar, we help minimize the work required to understand the way business is done in B.C. which in turn will make it easier to do business across the country and vice versa. Disclosure documents what to expect: Standardizing the franchise legislation across Canada can help minimize the regulatory burden that can happen when a business moves into the province so franchisors will already be accustomed to complying with similar rules elsewhere in the country. Details of what is required in the disclosure documents will be set out in the regulation. The disclosure documents will include information about the franchisor, such as: business background

5 litigation history bankruptcy or insolvency information financial statements It will also include information about the franchise offer, such as: costs (e.g., deposits or fees) copies of proposed franchise agreements a description of any exclusive territory restrictions (e.g., obligations to purchase from certain suppliers) the franchisor's policy on volume rebates conditions of termination, contract renewal and transfer of franchise a description of the franchisor s mediation process, if one is used training and other assistance programs advertising funds (whether the franchisee is required to contribute to an advertising fund) a list of their current and former franchisees Who was consulted: Groups consulted included an advisory group of franchise lawyers, the BC Law Institute, the Canadian Franchise Association, the BC Chamber of Commerce, Canadian Federation of Independent Businesses, BC Hotel Association, New Car Dealers Association, Retail Council of Canada, Retail Council of BC, Coalition of BC Businesses, Chartered Professional Accountants of BC, B.C. Small Business Roundtable and various franchisees and franchisors throughout British Columbia. Media Contact: Government Communications and Public Engagement Ministry of Small Business and Red Tape Reduction and Responsible for the Liquor Distribution Branch Connect with the Province of B.C. at: