Article by Pam Vermeersch and Juliana Mah, Gowling Lafleur Henderson LLP posted at Mondaq
In October 2012, the British Columbia Law Institute (BCLI) began a project to bring forth recommendations for a Franchise Act for British Columbia. So far, five of the 10 provinces in Canada have franchise legislation. Provinces that have enacted franchise legislation are: Alberta, Ontario, New Brunswick, Prince Edward Island, and most recently, Manitoba. This leaves British Columbia as the most populated province in Canada that has yet to put franchise legislation in place.
The BCLI released Consultation Paper on a BC Franchise Act setting out tentative recommendations back in March 2013. It encouraged members of the franchise community to review the paper and to provide comments by September 30, 2013 after which time it will prepare a final report and recommendation for submission to the B.C. legislature.
According to the Canadian Bar Association’s “An Agenda for Justice” issued on February 5, 2013, a Franchise Act for British Columbia would fairly balance the interests of both franchisors and franchisees and would provide protection to small business franchises. According to the report, the quick implementation of a Franchise Act for British Columbia would be a low-cost or no-cost legislative reform that could provide certainty for businesses.
Excerpt from the Canadian Bar Association “An Agenda for Justice” issued on February 5, 2013: Enact a Franchise Act. In 2012, the British Columbia Law Institute began a project on a Franchise Act for BC. Franchisees are usually run by small business owners operating businesses under licenses by franchisors. Franchisees are found in many industries: food, retail and services. Small business owners in BC make up 98 percent of all businesses in BC and many of these businesses are franchisees. These small businesses often lack the resources to fight unscrupulous franchisors. Where there are disputes, BC franchisees often have to litigate in Ontario or even the United States since it is common for franchise agreements to require disputes to be resolved by the governing law of the franchisor, which is usually a foreign jurisdiction. Litigating outside of BC is often prohibitively expensive for BC franchisees. A Franchise Act for BC would fairly balance the interests of both parties and it would provide protection to small business franchisees.
In addition, Jim Emmerton, Executive Director of BCLI, recently had this to say: “Given the prevalence of franchised businesses in BC and their importance to the provincial economy, it is surprising that BC has no franchising legislation.” “The introduction of BC franchise legislation would further increase the degree of harmonization of regulatory standards within Canada, while also giving appropriate and needed protection to BC franchise owners.”
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MFOA Members,
The Laws of Canada offer significantly more protection to franchise owners, than the laws in the US. Many of the most egregious clauses are not even allowed in Canada, even without the further protections that 5 provinces in Canada have to balance the playing field for franchise owners.
Dispute resolution clauses in the typical franchise agreement requires that disputes are to be resolved by the governing law of the franchisor, which very often a foreign jurisdiction. Litigating outside of of the franchise owners state/province is often prohibitively expensive for franchise owners. The Franchise Act for BC would allow those disputes to be heard in British Columbia.
Those dispute resolution clauses are a key tool, franchisors use to bully franchisees. They feel the chances that the franchisee will sue are mute, because the cost to litigate are too high for the typical franchisee.
Jim Coen
MFOA Executive Director
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