British Columbia's New Franchise Rules Increase Protection for Franchisees
The new Franchises Act of British Columbia is going to take effect on February 1, 2017, making the "Pacific Province" the sixth province to regulate the industry in Canada. This act was passed in November 2015, but the B.C. government has been working since then to develop regulations for the disclosure items that must now be part of the Franchise Disclosure Document (FDD) given to franchisees in B.C.
This new law brings B.C. in line with other provincial franchise acts across the country. Franchisers will be required to give potential B.C. franchises an FDD that discloses what a franchisee needs to know about the business so he or she can make an informed decision. The disclosure will have to include, at the very least, a list of costs and fees associated with receiving and running the franchise location, a description of the opportunity and any granted territory, details on litigation involving the franchise itself or affiliates, and a list of former and current franchisees the prospective franchisee can speak to. Reviewed or audited financial statements must also be included, along with copies of all contacts the franchisee will have to sign.
There are some differences between the B.C. act and other provincial franchise legislation. For example, unlike Ontario, a franchiser in B.C. can accept a refundable deposit from a franchisee prospect, and they can also require the prospects to sign confidentiality agreements before they receive the FDD. The FDD also can't be invalidated by a technical defect or error that doesn't impact the substance of the required disclosures.
The ultimate benefit of this new legislation applies to franchisees in B.C., who will now be entitled to receive complete and full disclosure about the franchise opportunity they're considering under provincial law. This will also allow those franchisees to access legal remedies when the franchiser or its salespeople have made a material misrepresentation during the sale process, as noted by DLA Piper (www.dlapiper.com). Under this act, if the franchiser has made such a misrepresentation, failed to disclose a required fact or didn't provide an FDD to a prospective franchisee, the franchisee then can use the available legal remedies, which include rescinding the entire contract and receiving his or her investment money back plus losses.
New franchise legislation in B.C. is good news for franchisees in that province, and it also speaks to the importance of having a full disclosure from a franchiser. When you're considering your franchise options, make sure to research and study all the disclosures you receive so you're making a fully informed choice.