Earlier this year, the Legislative Assembly of Ontario resumed its debate of Bill 45, an act aimed at enhancing public health by enacting, among other statutes, the Healthy Menu Choices Act, 2015 (the “Act”). If passed, the Act will require every person who owns or operates a regulated food service premise to display the caloric information of their standard food items. Corporations contravening the Act will be subject to a fine of not more than $5,000 for every day on which the offence occurs or continues and, for a second or subsequent offence, to a fine of not more than $10,000 for every day on which the offence occurs or continues. The proposed legislation, as originally drafted, raised concerns among franchisors due to the express inclusion of “franchisor” within the definition of “a person who owns or operates a regulated food service premise”. A summary of this issue can be viewed in our previous blog post.
Franchisors and franchisees are separate legal entities, and their respective responsibilities for the operation of a franchise, including compliance with local laws, are in general governed by the terms of their franchise agreement. The previous definition of “a person who owns or operates a regulated food service premise” would have potentially held franchisors liable for the acts of franchisees even where the parties had contractually agreed otherwise thus undermining the independent nature of the franchisor-franchisee business relationship.
On April 28, 2015, the Standing Committee on General Government voted to amend the Act’s reference to franchisors. The revised draft of the proposed legislation amends the definition of “a person who owns or operates a regulated food service premise” to mean “a person who has responsibility for and control over the activities carried on at a regulated food service premise”, which “may include a franchisor” (emphasis added). The revised definition reflects the intention that liability should rest with the person or entity who in fact has control over the franchise operation and not necessarily the franchisor.
Bill 45 has been ordered for third reading by the Legislature and, if passed, will be enacted into law on January 1, 2017. Franchisors and franchisees operating in Ontario should review the Act and their franchise agreements and consider the implications for their businesses prior to this date, including the extent to which the franchise agreement confers an obligation on the franchisor to be responsible for and control the activities of a franchisee.