Proposed Franchise Act could expand protections for franchisees

Proposal would bring British Columbia law in line with other provinces and U.S.

According to the Globe and Mail, the British Columbia government is moving closer to passing the B.C. Franchise Act, which would bring the province's franchise laws more in line with the United States and other Canadian provinces. The proposed legislation would offer greater protections to franchisees when conducting business transactions with a franchisor. Proponents of the legislation say it is long overdue and should be welcomed by the British Columbia business community as a whole.

Significant changes

The proposal would primarily affect financial disclosure requirements expected of the franchisor when dealing with a prospective franchisee. If the legislation is passed in its draft form, it would require the franchisor to disclose certain information, including:

  • its history, along with the history of its principals
  • the full costs associated with setting up a franchise
  • information about advertising and the location of nearby franchises
  • information about current and former franchises
  • any history of litigation, administrative proceedings, or bankruptcy involving the franchisor or its principals

The legislation also provides for a two-week "cooling-off period" during which the prospective franchisor can seek legal and financial advice before committing to an agreement. In addition, if the agreement does not abide by the new disclosure rules, the franchisee would have a window during which he or she could opt out of the agreement and receive a full refund. The act would also require all disputes to be handled in British Columbia, thus saving franchisees the expense they currently face of often having to travel to distant cities, such as Toronto or New York, to resolve a dispute.

Proposals overdue

The changes are generally seen as being to the benefit of both franchisees and the business community at large. As the Financial Post points out, franchisees will have the advantage of enjoying greater protections under the proposed law. The changes would make it much more difficult, for example, for an unscrupulous franchisor to take advantage of a prospective franchisee.

Franchisors will also benefit from the consistency and predictability that the legislation brings with it. The B.C. Franchise Act is largely based on legislation already in place in Alberta, Manitoba, New Brunswick, Ontario, and Prince Edward Island, along with the United States, meaning franchisors would simply have to continue complying with the laws they are already accustomed to in those jurisdictions.

Legal help for businesses

Since the B.C. Franchise Act has yet to be tabled, let alone passed into law, it remains to be seen what form the changes to the province's franchise laws will ultimately take. In the meantime, the above story is a useful reminder of the constantly shifting nature of commercial and corporate law in British Columbia. Businesses should always consult with a qualified commercial law firm for expert advice and guidance for handling the legal side of important business transactions.