On February 1, 2017, British Columbia’s new Franchises Act and accompanying regulations will come into force. This gives franchisors about three months to ensure their disclosures and business practices comply with the new requirements, franchise lawyers note.
Although the act was passed by the legislature in November, 2015, the provincial government has been developing regulations to deal with those items of disclosure that must be included within a B.C. franchise disclosure document (FDD). Cabinet has now approved those regulations.
British Columbia joins Alberta, Manitoba, Ontario, New Brunswick and Prince Edward Island by adopting franchise-specific legislation aimed at ensuring that franchisors and franchisees deal fairly with one another in a more transparent regulatory environment.
Similar to the franchise-specific legislation in other provinces, the B.C. Franchises Act:
• requires franchisors to provide prospective franchisees with a disclosure document containing detailed information about the franchisor and franchise system at least 14 days before a franchise agreement is signed or any consideration is paid to the franchisor;
• permits franchisors to deliver a disclosure document electronically; and permits franchisees to rescind their franchise agreement in certain circumstances.
Franchisors franchising in B.C. will be able to accept refundable deposits from prospects and can require prospective franchisees to execute confidentiality agreements prior to the FDD being delivered to the prospect, and waiting for the mandatory 14-day cooling-off period to expire before the franchisee can sign any other agreements relating to the franchise. As well, electronic delivery of an FDD will be permitted.
But the real benefit of this legislation, said lawyer Tony Wilson, a member of the British Columbia government’s advisory group advising on the B.C. Franchises Act and regulations, is for B.C. franchisees to have legal options when there has been a material misrepresentation in the franchise sales process by the franchisor or its salespeople.
“The B.C. Franchises Act will go a long way to protect B.C.’s large and growing number of small-business operators owning a franchised business,” Wilson said.