Canadian Lawyer InHouse

NOVEMBER 2016 40 INHOUSE I n d u s t r y S p o t l i g h t include the sheer proximity of the two markets, as well as a shared language, with the exception of Quebec, and many similar cultur- al elements. Canadians are famil- iar with U.S. brands, but they're also often ready to experiment with something new. Purchasing power remains strong, despite economic weak- ness in places like Alberta, and the U.S. dollar goes further here. Yet only fi ve provinces have legislation that specifi cally addresses franchise busi- nesses, with British Columbia set to fol- low suit once regulations there come into force. It's a patchwork of provincial laws that differentiates Canada from other jurisdic- tions, which tend to have centralized laws on the issue and which often have less draco- nian rules on disclosure. The different laws, and lack of laws, present an extra compli- cation for someone looking to expand into several provinces. But it's not a deal breaker. "It's unusual. As far as I know, Canada is the only country in the world where part of the country has a franchise law and part of it doesn't," says Weinberg. "Does that alone stop someone from starting a franchise or grow their business? No." In Ontario, the relationship between franchisor and franchisee is governed by the Arthur Wishart Act (Franchise Dis- closure) of 2000, which sets guidelines on the information that must be made avail- able, both at the start of a partnership and if there's a material change. "It is akin to consumer protection legislation in that it is intended to protect the prospective fran- chisee, and the notion is that because fran- chises are typically longer term and require a signifi cant investment, that a franchisee needs to be duly informed before they make that commitment," says Jennifer Dolman, a litigation partner at Osler Hoskin & Har- court LLP. "The legislation is designed in such a way to protect the franchisee and to try to address what is a power imbalance be- tween franchisor and franchisee." But Dolman says that can lead to a heavy burden on franchisors, as the franchisees' legal representatives "push the envelope" in their submissions before the courts. "There is still a lot of uncertainty regard- ing what must be disclosed, and regarding some other issues in terms of franchise li- ability," she says, noting that rulings have sometimes been contradictory, and the ar- guments from franchisees can "create too many diffi culties and burdens" for franchi- sors. "We've had 15 years of Ontario legis- lation and there are still questions that are not being answered, and you get these deci- sions that in many instances people are not expecting at all when you look at what the actual language in the statute says . . . "It just creates a lot of additional risk and uncertainty if you are coming into Canada. Even the lawyers cannot guarantee that you've got the perfect document that's fool- proof because there are still questions that we don't have answered." Dolman notes that Osler, which repre- sents franchisors rather than franchisees, has developed a disclosure document that can be used in all provinces, including those without specifi c franchise legislation. But a lot of work is still needed to customize each document for individual circumstances. Cases that are helping to clarify Ontar- io's franchising legislation include a pro- franchisor Superior Court ruling that a de- cision to wind down GM dealerships did not call for a new set of disclosure documents (Trillium Motor World Inc. v. General Motors of Canada Limited), and a second case involv- ing the auto giant (Addison Chevrolet Buick GMC Ltd. v. General Motors of Canada Ltd), where courts have declined to dismiss an argument from franchisees that GM's U.S. parent company should share liability. That sort of shared liability, if the case ends up with defeat for GM, could be a concern for larger companies seek- ing to do business in Canada, given that a non-Canadian parent is not even a party to franchise disclosure documents. But perhaps more worrying than the legal challenges, to franchisors and franchisees alike, is the possibility that Ontario could change its labour rules and make franchisors joint employers with their franchisees. The idea, a favourite with trade unions, made it into an interim report on a review of Ontar- io's changing workplaces, a document that was released in July. It's a concept that's also under discussion in the United States, where the National Labor Relations Board is ask- ing for a court ruling on whether hamburger I had calls this week with three international clients looking at Canada to develop their stores and develop their e-commerce platform. They see Canada as being a relatively easy and not so expensive place to do business, with 30-million-plus people to buy their goods and services. STEPHANE TEASDALE, Dentons

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