Franchise law will take effect later this year

"It's a first baby step, but it is as far as the government is willing to go. It will take care of the bottom feeders," franchisors who lie, intimidate and swindle franchisees. “And it does open the Pandora's Box. Once you give people hope all things are possible.”

The Record
July 5, 2000

Franchise law will take effect later this year
Dave Pink

Ontario legislation regulating future sales of franchise ventures is expected to take effect this fall.

The Arthur Wishart Act, formerly the Franchise Disclosure Act, is now awaiting proclamation after receiving third reading in the legislature in May and royal assent in June.

The law will force companies selling franchises to disclose basic financial information to prospective buyers at least two weeks before any agreement is signed.

As well, the law prohibits franchisors from punishing franchisees for meeting or speaking with other franchisees. And it stipulates that both parties have a "duty of fair dealing" including a responsibility to act in good faith and according to reasonable commercial standards.

About 1,300 companies sell franchises in Canada, dealing in everything from restaurants to auto repair shops and cleaning services. This is Ontario's first attempt to regulate the industry, but critics say the law won't adequately deal with the bulk of disputes, which tend to revolve around the interpretation of restrictive and punitive franchise agreements.

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"It's a first baby step, but it is as far as the government is willing to go," says Les Stewart of the Canadian Alliance of Franchise Operators.

But, he noted, "it will take care of the bottom feeders," franchisors who lie, intimidate and swindle franchisees.

"And it does open the Pandora's Box. Once you give people hope all things are possible," says Stewart, who notes that a great many franchise operations do deal fairly with their franchisees.

"The big thing is that franchisees now have the right to stick together and form associations. No single franchisee can afford to prove a franchisor wrong in court. The only effective way to deal with these problems is (for them) to get together and understand what the options are."

The law does have the full support of the Canadian Franchise Association, a Mississauga-based organization of franchisors.

"It's in keeping with the approach we've taken," says association president Richard Cunningham, who says his members have always had to disclose financial information to potential buyers.

"The key to the act is allowing the buyer the information they need to make the proper decision, but it doesn't put a lot of red tape in place for the people who are franchising.

"This is what the government was attempting. There is consistency now."

The franchise law has been named for the late Arthur Wishart, a lawyer and former Ontario Attorney-General, who in 1971 accepted a report from a committee headed by Samuel Grange warning of the deceptive practices of some franchisors.


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