New franchise legislation now in place

Minister of Consumer and Commercial Relations Bob Runciman announced today that the Ontario government's legislation providing for fairness in the franchise marketplace has been proclaimed and the regulations are now in effect.

Ministry of Consumer and Business Services
January 31, 2005

New franchise legislation now in place
News Release

TORONTO — January 31, 2001 — Minister of Consumer and Commercial Relations Bob Runciman announced today that the Ontario government's legislation providing for fairness in the franchise marketplace has been proclaimed and the regulations are now in effect.

"This legislation affects a sector of the economy that generates billions of dollars in sales in Ontario each year," said Runciman. "By ensuring fairness when buying and selling franchise operations, we will give investors greater confidence in Ontario, encouraging them to provide jobs and continue to spur economic growth in this province."

Sections of the Arthur Wishart Act (Franchise Disclosure), 2000 requiring pre-sale disclosure of information by franchisors, and setting out the consequences for failure to disclose appropriate information, were proclaimed today.

Some sections, which ensure that franchisees have the right to associate freely and to form organizations, were proclaimed in July 2000. Also, the sections that came into force last summer set a standard of conduct to govern the franchise relationship and encourage the fair behaviour of all parties to a franchise agreement.

Kevin Ryan, Executive Vice-President of National Grocers Retail said "The grocery industry considers that this legislation strikes an appropriate balance. It provides potential franchisees with the information they need to make wise business decisions, without creating relationship legislation and making it difficult for franchisors to compete with the national chains."

"The legislation is practical and helps to protect potential franchisees, and encourages growth in the franchise sector. It provides a level playing field based on honesty and fairness," said John Sotos, LLB, a Toronto solicitor who represents a number of franchisees.

Participation of franchisees and franchisors in the Franchise Sector Working Team, which was struck to review pertinent issues and proposals was key to development of effective legislation, said Runciman.

The legislation is named in honour of Arthur Wishart, MPP for Sault Ste. Marie from 1963 until 1971, Member of the Order of Canada and Attorney General of Ontario, who devoted much effort to the franchise issue when he served as Minister of Financial and Consumer Affairs.

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Backgrounder

Arthur Wishart Act (Franchise Disclosure), 2000

What is the Act all about?
The Arthur Wishart Act (Franchise Disclosure), 2000 is a Government of Ontario initiative to provide for fairness in the franchise marketplace. Some sections of the legislation were proclaimed in July 2000. Others came into effect January 31, 2001.

It establishes standards for pre-sale disclosure of information by franchisors. The Act requires a franchisor to provide a disclosure document at least 14 days prior to entering into a franchise agreement or receiving any payment relating to a franchise.

The Act also provides a right to associate for franchisees and a duty of fair dealing, which includes the duty to act in good faith and in accordance with reasonable commercial standards. This section of the Act applies to all existing franchise agreements.

What businesses are covered under the Act?
There are two areas of franchise arrangements that are covered by the Act - traditional franchises and business opportunities. The Act covers franchise agreements where the franchise business is operated wholly or in part in Ontario.

How will the Act help me if I want to buy a franchise?
As well as requiring a franchisor to provide a disclosure document at least 14 days prior to entering into a franchise agreement or receiving any payment relating to a franchise, the Act also imposes a duty of fair dealing on each party to a franchise agreement and provides a right to associate for franchisees. This gives franchisees the right to associate with other franchisees, regardless of any provisions to the contrary that may exist in a franchise contract.

What is franchise disclosure?
The Act requires a franchisor to provide a disclosure document at least 14 days prior to entering into a franchise agreement or before any payment is made by or on behalf of a prospective franchisee. The Act and regulation set out the minimum information, such as the seller's business background and all the details of the business arrangement, that a franchisor must include in a disclosure document.

What happens if a disclosure document was not provided?
There are certain consequences where a disclosure document was not provided or was not provided within the required time. You should contact your lawyer if you did not receive the required disclosure.

This news release is available at: http://www.cbs.gov.on.ca/mcbs/english/news_releases.htm


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Risks: Ministry of Consumer and Commerical Services, Ministry of Consumer and Business Services, Ministry of Government and Consumer Services, Ministry of Government Services, Ontario, Franchise Sector Working Team, Arthur Wishart Act (Franchise Disclosure), 2000, Canada. Franchise laws protect franchisors, not franchisees, Canada, 20010131 New franchise

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