9128-7755 Québec Inc. (Safari Centre d’Animaux) v. 9168-4241 Québec Inc., J.E. 2008 2016
On May 8, 2006, the plaintiff franchisor and defendant franchisee entered into a franchise agreement in which the franchisor undertook to conceptualize, finance and build a pet shop. The relationship between the franchisor and franchisee ultimately deteriorated, the franchisee ceased to pay royalties and the franchisor sough the termination of the franchise agreement.
The principals of the franchisee operated an independent pet shop for 20 years prior to entering into the franchise agreement for the operation of their business under the banner "Safari Centre d’Animaux". Problems with the ventilation system forced the franchisee to commence operations two months later than initially agreed upon. Later, the franchisee asked the franchisor, on numerous occasions, to help with the several problems relating to the computer system. The relationship between the parties subsequently deteriorated. The franchisee advised that he was not provided with adequate information about the construction, conceptualization and financing of the pet shop and in July 2007, the franchisee ceased to pay royalties. The franchisor subsequently noted the franchisee in default of its obligations under the franchise agreement. In September 2007, the franchisor terminated the franchise agreement and the sublease.
The Court refused to annul the franchise agreement since the franchisor did not commit any fraud, nor did he make any misrepresentations regarding the construction, conceptualization and financing of the pet shop, which could have vitiated the franchisee’s consent. The Court concluded that the franchisee had significant experience in operating a pet shop, that he failed to act diligently by signing financial documents without fully inquiring as to the scope of his obligations and that he demonstrated a lack of interest in learning the franchisor’s system by failing to follow a training course. The parties failed to deliver relevant information in a timely and effective manner to ensure good communications. The Court declared the franchise agreement and the sublease terminated and ordered the franchisee to pay to the franchisor royalties owed up to the receipt of the notice of termination in September 2007, even though the franchisee had continued to operate the franchise afterwards.