The grant of franchises in the Province of Manitoba will be subject to regulation as of October 1, 2012, joining Ontario, Alberta, New Brunswick and Prince Edward Island with pre-sale disclosure legislation in Canada.
As a result, franchisors offering franchises in Manitoba will be required to amend their current disclosure document to comply with Manitoba’s requirements. Like Alberta, New Brunswick and Prince Edward Island, the Manitoba Franchises Act allows for a “wrap-around” to a pre-existing disclosure document in order to include the Manitoba-specific requirements.
While Manitoba’s disclosure regulation mirrors, in many respects, the disclosure requirements in Ontario, Alberta, New Brunswick and PEI, there are some noteworthy differences.
Likely the most unique, and significant, feature of the Act is that a disclosure document can be delivered piecemeal. Although the pre-conditions for such delivery may be more cumbersome than the “one document at one time” delivery requirement expressly prescribed by Ontario, New Brunswick and Prince Edward Island, the ability for multiple deliveries may be useful for many reasons including, for example, if the franchisor’s financial statements are not available at the time that a franchisor wishes to initiate disclosure to a prospective franchisee.
The following conditions are prescribed by the regulations for multiple-part delivery of a disclosure document:
- The statutorily-prescribed risk warnings under Section 3 of the regulations must be provided with the first delivery of disclosure materials provided to a prospective franchisee;
- All information prescribed in Part 1 of Schedule A of the regulations, being background information about the franchisor, its directors, officers and partners, and litigation and bankruptcy history must be provided together at one time;
- The following statement must appear prominently at the top or front of each document that forms part of the disclosure document:
THE FOLLOWING INFORMATION FORMS PART OF THE DISCLOSURE DOCUMENT REQUIRED TO BE PROVIDED UNDER THE FRANCHISES ACT; and
- The prescribed certificate of disclosure must be included with the last part of the disclosure provided by the franchisor.
As such, although disclosure may be provided over time and in any number of documents, the disclosure obligation under the Act is not met until the last document forming the disclosure document is provided. It is on this date that the 14-day disclosure review period begins, during which neither the franchise agreement nor any other agreement relating to the franchise can be signed by the prospective franchisee or consideration paid by the prospective franchisee.
The regulations also require in a number of instances a form of “negative disclosure,” a statement that no information is being provided with respect to a specific disclosure item. If, for example, the franchisor does not provide earnings projections or an estimate of annual operating costs, the disclosure document must provide a statement to that effect. A statement must also be made in the disclosure document if training, manuals or other assistance is not offered to the franchisee. The Certificate of Franchisor, the form of which is prescribed by the regulations, requires a supplementary statement if the franchisor is relying upon an exemption from providing financial statements.
Finally, the Regulations expressly permit delivery of a disclosure document by fax, courier or electronic means, which will make providing the disclosure document to a prospect much easier for franchisors.
Although substantially similar to the disclosure requirements in the other provinces, there are many unique elements in the Manitoba Regulations that will require franchisors to modify their current disclosure documents to comply with the new Manitoba requirements