Learn how the law helps potential franchisees make informed decisions about investing and gives existing franchisees the right to associate with each other.
The Arthur Wishart Act (Franchise Disclosure), 2000, was put in place to ensure owners (franchisors) give potential buyers (franchisees) detailed information about the franchise before the buyer signs a contract or makes any payments.
Before you sign a franchise agreement or make any payments to the franchisor, you should consult with legal and financial professionals who are independent from the franchisor.
Ask your financial advisor or accountant to review all disclosed financial documents.
Ask your lawyer to review all materials, contracts and proposals, and ensure you understand:
The government is not involved in the review or approval of franchisors or their disclosure documents. Disputes about franchise agreements are settled through the courts.
Under the law, the franchisor is required to provide a disclosure document at least 14 days before a franchisee signs an agreement or makes any payment to a franchise.
The disclosure document will include information about the franchisor including:
It will also include information about the franchise offer, such as:
A “material change” is something that could reasonably be expected to have a significant negative effect on the value of a franchise or on your decision to buy it. Before you sign the agreement or make any payments, the franchisor must tell you if there have been any material changes since you received the disclosure document.
If a disclosure document or a statement of material change is late or otherwise doesn’t meet the act’s requirements, the franchisee can cancel the agreement without penalty or obligation up to 60 days after receiving it.
If a disclosure document is not provided, the franchisee may cancel the agreement without penalty or obligation up to two years after entering into the franchise agreement.
If the franchisee suffers a loss because the disclosure document or statement of material change were incomplete or included a misrepresentation, the franchisee has the right to take legal action for damages.
If the contract is cancelled the franchisor has 60 days to refund the franchisee’s money.
Some large, established franchisors do not have to provide financial statements if they meet certain criteria, which are detailed in Part III of O. Reg. 581/00.
If the franchisor is exempt from disclosing financial documents:
The disclosure document includes a list of current and former franchisees. You can learn about how a franchisor operates by talking to some of them before you invest. Some questions to ask include:
The Arthur Wishart Act (Franchise Disclosure), 2000 encourages fair dealing and gives franchisees the right to associate and share information with other franchisees.
Under the act, the “duty of fair dealing” requires all parties to a franchise agreement to act in good faith and comply with reasonable commercial standards.
If any party does not live up to the duty of fair dealing, the other party or parties have the right to take legal action.
The law gives every franchisee the right to associate with other franchisees ( e.g. , to form or join an organization of franchisees) even if a contract says this is not allowed.
If a franchisor or a franchisor’s associate interferes with this sort of association, a franchisee can take legal action for damages.