New franchise law means “full disclosure”

The franchises act comes into effect Feb. 1 and will force franchisors to disclose financial information

By
Western Investor
December 8, 2016






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The new Franchises Act of British Columbia takes effect on February 1, 2017, making B.C. the sixth province to regulate the industry in Canada. This new law brings B.C. in line with other provincial franchise acts across the country. Franchisors will be required to give potential B.C. franchisees a franchise disclosure document (FDD) that discloses what a franchisee needs to know about the business so he or she can make an informed decision.

The disclosure will have to include a list of costs and fees associated with receiving and running the franchise location, a description of the opportunity and any granted territory, details on litigation involving the franchise itself or affiliates, and a list of former and current franchisees the prospective franchisee can speak to. Reviewed or audited financial statements must also be included, along with copies of all contracts the franchisee will have to sign.

 There are some differences between the B.C. act and other provincial franchise legislation. For example, unlike in Ontario, a franchisor in B.C. can accept a refundable deposit from a franchisee prospect, and can also require the prospects to sign confidentiality agreements before they receive the FDD. 

The FDD also can’t be invalidated by a technical defect or error that doesn’t impact the substance of the required disclosures.

The ultimate benefit of this new legislation applies to franchisees in B.C., who will now be entitled to receive complete and full disclosure about the franchise opportunity they’re considering under provincial law. This will also allow those franchisees to access legal remedies when the franchisor or its salespeople have made a material misrepresentation during the sale process. 


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