New Brunswick Regulation Starting 2011

New Brunswick will be joining the Canadian provinces of Ontario, Alberta and Prince Edward Island early next year in regulating the sale of franchises. Although the legislation was initiated three years ago, it is just now putting regulations into effect.

Blue MauMau
August 12, 2010

New Brunswick Regulation Starting 2011
Janet Sparks

FREDERICTON – New Brunswick will be joining the Canadian provinces of Ontario, Alberta and Prince Edward Island early next year in regulating the sale of franchises. Although the legislation was initiated three years ago, it is just now putting regulations into effect.

More than a year after releasing its Consultation Paper on proposed regulations to the New Brunswick Franchises Act, the Cabinet approved the final draft last month. Like the other provinces, the act allows franchisors to use disclosure documents prepared for use in other jurisdictions, if the additional information is included in a “wrap-around” disclosure document.

Attorney Debi M. Sutin of law firm Gowling Lafleur Henderson LLP explains that two separate regulations were approved. First, the law prescribes items of information required by a franchisor to be disclosed to buyers. Second, its mediation regulation prescribes the method of appointing a mediator, the timing and conduct of mediation and forms to be used for notices, statements of facts and issues and the certificate of completed mediation. Sutin explained that mediation is optional in the maritime province, not mandatory. The regulation only provides for the methods of delivering notice of a dispute if companies elect to mediate.

While New Brunswick’s Franchise Act mirrors the regulations to the franchise legislation in the other two provinces, Sutin elucidated that there are some note-worthy differences. In her Franchise and Distribution newsletter, she addresses those provisions.

In addition to what information is required to be disclosed, the new law will necessitate a form of “negative disclosure.” As an example, Sutin said if a franchisor does not provide earnings projections or training to prospective franchisees, the new regulation will require a statement to that effect. Disclosure of criminal convictions, civil proceedings and bankruptcy must also be disclosed in New Brunswick for shorter periods of time than other provinces.

If the franchisee is required to operate in accordance with the franchisor’s operations manuals, either the table of contents or the manual must be included in the disclosure documents, or there must be a statement describing where in New Brunswick the manuals can be inspected.

Regarding exclusive territory and proximity of units, the new regulations mandate that the franchisor must disclose its policies on Internet or other “distance” sales. Franchisors must also inform franchisees that they are required to inquire about licenses and permits necessary in operating their business, other than the ones mentioned in the usual documents.

The Gowling law firm is cautioning franchisors to ensure that their current disclosure documents are modified as necessary to conform with the new regulations, which go into effect February 11, 2011.

Sutin said the bulk of people franchising in New Brunswick come from the outside, but that the province has its own share of local franchise businesses. She said their small province is just following along with the rest of Canada that has felt a need to regulate franchising in order to provide some minimal protection of its small business investors.

Attorney Michael Webster, chair of the strategic committee of the International Association of Franchisees and Dealers, published an article last month regarding important changes in franchise dispute resolution. He addressed the New Brunswick passage of mediation regulation, under the new act stating,

http://www.bluemaumau.org/9206/new_brunswick_regulation_starting_2011


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