On March 31, 2014, the British Columbia Law Institute (BCLI) released its report on a Franchise Act for British Columbia. Almost a year to the day that BCLI issued its Consultation Paper on a Franchise Act for British Columbia, it released its report which recommends the enactment of franchise legislation for British Columbia. If the recommendations are adopted, British Columbia would be the 6th province in Canada to regulate franchising, following the Provinces of Ontario, Alberta, Prince Edward Island, New Brunswick and Manitoba.
BCLI’s principal recommendation is that the franchise legislation be based generally upon theUniform Franchises Act developed by the Uniform Franchise Law Conference of Canada in order to contribute to the harmonization of franchise legislation within Canada and further the objectives of the federal-provincial Agreement on Internal Trade, being the reconciliation of regulatory standards and standards-related measures within Canada.
The full Report can be found here.
Key recommendations for the legislation include the following:
- Wrap-around disclosure documents are permissible if supplemented with additional information required to comply with the British Columbia legislation and regulations;
- A disclosure document is valid if it is in substantial compliance with the disclosure requirements of the legislation and regulation. Minor defects not affecting a franchisee’s investment decision will not render a disclosure document non-compliant;
- Franchisors can accept a fully refundable deposit from a prospective franchisee prior to the franchisor providing disclosure so long as the deposit does not exceed an amount prescribed by regulation, is refundable without deductions and does not obligate the franchisee to enter into any franchise agreement;
- There is no need for mandatory mediation of franchise disputes;
- Disclosure documents can be delivered electronically or in a machine-readable format;
- The prohibition against a waiver or release of rights under the legislation does not apply to a post-dispute settlement agreement;
- A franchisee is not precluded from claiming damages in addition to a statutory right of rescission so long as there is no double recovery; and
- Similar to Ontario, Alberta and Manitoba, a franchisor will be exempt from having to disclose their financial statements to prospective franchisees if their minimum net worth is $5,000,000, or $1,000,000 if the franchisor is controlled by a corporation having a net worth of at least $5,000,000.
BCLI’s report concluded that the adoption of the recommendations for franchise legislation in British Columbia would extend to BC-based franchisees the same or better protections as those enjoyed by their counterparts in the 5 other Canadian provinces with franchise legislation while, at the same time, minimizing the regulatory burden imposed on franchisors who will now have to comply with legislation in a 6th province.