BC government seeks input for proposed franchise law

The government of British Columbia is seeking public input on a regulation under the pending Franchises Act (Act), a new piece of franchise legislation that will affect the rights and obligations of parties to franchise agreements. The Act is not yet in force – its third reading was recently completed before the legislative assembly¹ and the government is in the process of drafting the corresponding regulations.

The objective of the Act, in the words of the provincial government, is to “help level the playing field for small business owners and provide certainty for investors.”² The Act applies to franchised businesses that are “wholly or partly in British Columbia,” and will govern franchise agreements entered into or renewed/extended after the Act comes into force.

The Act’s provisions closely follow franchise legislation in other provinces, including Ontario’s Arthur Wishart Act and Alberta’s Franchises Act. Key provisions include:

• Duty of fair dealing – all parties to a franchise agreement will have a duty to act in good faith when performing, and enforcing their rights under, franchise agreements.
• Right to associate – franchisees will have a right to associate with other franchisees and to form organizations of franchisees.
• Duty of disclosure – franchisors will be required to provide franchisees with a disclosure document before the parties enter into a franchise agreement or any other agreement related to a franchise, and before any payment is made.
• Right of rescission and right to damages – after receiving the required disclosure from the franchisor, the franchisee will have the right to rescind a franchise agreement within 60 days, without penalty or obligation, if the disclosure does not comply with the legislation. The franchisee is also entitled to damages if it suffers a loss as a result of a misrepresentation contained in the franchisor’s disclosure.

Relief for technical errors

Although the Act will hold franchisors liable for misrepresentations contained in disclosure documents, the Act provides relief to franchisors for technical errors in disclosure. Under the proposed section 9, a defect in form, a technical irregularity or an error may not be considered violations of the Act where those defects do not affect the substance of the disclosure document and are substantially in compliance with the Act.

Input sought

The regulation on which the government is seeking input will set out the particulars of what must be disclosed and how a disclosure document must be delivered, and will be drafted based on the Uniform Law Conference of Canada’s Disclosure Documents Regulation, the recommendations of the BC Law Institute and public feedback.

The government has requested that public input be submitted by January 15, 2016, through emailing CPLO@gov.bc.ca with the subject line “Franchise Act consultation” or by regular mail to:

Civil Policy and Legislation Office
Justice Services Branch
Ministry of Justice
PO Box 9222, Stn Prov Govt
Victoria, BC V8W 9J1

The author wishes to thank Kaitlin Shung, articling student, for her help in preparing this legal update.

Footnotes

1. https://www.leg.bc.ca/Pages/BCLASS-Legacy.aspx#%2Fcontent%2Fdata%2520-%2520ldp%2FPages%2F40th4th%2Fvotes%2Fprogress-of-bills.htm
2. http://www.ag.gov.bc.ca/legislation/franchises/index.htm