Canadian Lawyer InHouse

INDUSTRY SPOTLIGHT DISCLOSURE Why a disparity in franchise legislation in certain provinces has created a two-tiered system in Canada. By Richard Foot Tony Wilson gets a lot of calls from desperate franchise owners. Not the sophisticated or the wealthy, but small-time operators who re-mort- gaged homes or borrowed money from family members, and then lost their shirts in the process, or were bullied by the company they invested with. Because Wilson practises Vancouver, there's little he can do to help his local mom-and-pop clients, outside the lengthy and cumbersome avenues of the common law. British Columbia is one of five remaining provinces without specific legislation protecting franchisees from fraudulent, inept, or underfinanced franchisors. "Because immigration is so prevalent law in specialist with Boughton Law Corp. "I don't want to say that all franchising is bad, that's not the case. But there are circumstances where people have come from other countries and have been taken advantage of by unscrupulous franchisors, and they really don't have much of a remedy. Why isn't B.C. seek- ing to help these investors?" In October, Manitoba will become franchisors to fully disclose financial data, litigation history, and other infor- mation to prospective franchisees. Disclosure laws offer franchisees a legislation requiring here, I see a lot of franchisees — often new Canadians — where the deal hasn't worked out," says Wilson, a franchise range of protections, including codified standards of good faith and commer- cial reasonableness, and the ability to enforce an agreement once it has been entered. Most importantly, disclosure documents give franchisees the right to rescind contracts — and fully recoup investments and lost earnings — where a franchisor has failed to disclose the required information. For both sides, such statutes also have the fifth province, after Alberta, Ontario, New Brunswick, and Prince Edward Island, to enact the benefit of levelling the industry play- ing field, by discouraging what franchise lawyers call "fly-by-nighters" — franchi- sors lacking either sound business mod- els or ethical sales practices. A decade ago, when Alberta and Ontario were the only provinces with franchise legislation, provincial finance ministers asked the Uniform Law Conference of Canada, the indepen- dent public-sector legal reform body, to help streamline the franchise system by recommending a model disclosure law all provinces could adopt. INHOUSE WWW.CANADIANLAWYERMAG.COM/INHOUSE AUGUST/SEPTEMBER 2012 • 31

• Cover