Manitoba is expected to follow the lead of Alberta, Ontario and two Atlantic provinces in introducing new legislation that would require franchisors to provide a franchise disclosure document to potential franchisees.
The disclosure document is the compendium of information about a franchise system that franchisors must deliver to franchisees to assist them in making informed investment decisions, explained Chad Finkelstein, a franchise lawyer at Toronto-based Dale & Lessmann LLP.
The Manitoba Franchises Act is not yet in force, but the release of draft regulations is a signal of the form the law could take.
In many ways, the requirements under Manitoba franchise laws look very similar to those statutes already in place in other provinces, but certain notable exceptions warrant specific mention: -- the Manitoba Franchises Act will allow for electronic delivery of disclosure documents; -- franchisors will be permitted to accept fully refundable deposits of up to 20 per cent of an initial franchise fee up to $100,000 and enter into confidentiality agreements with prospective franchisees without triggering the disclosure document delivery requirement; -- if the franchisor uses an operations manual, its table of contents must be disclosed; and -- there are various requirements for statements to be made where the franchisor is not providing any information in relation to certain disclosure items, such as earnings projections.
It is not known when the Manitoba regulations will come into effect.
from Western Investor January 2012
