Franchises in Canada were once largely more expensive...
As a current or potential franchisee, staying on top of laws that affect Canadian franchises is a must. Pending and incoming legislation can have an impact on your business on multiple levels, so read on to discover the most hot-button law topics for Canadian franchises in 2016.
Who's in Charge?
Back in 2015, the US National Labor Relations Board dealt a blow to the industry in general by suggesting that franchisors might be liable as joint-employers of the workers on their franchisee's staff. This same threat looms in Canada, as the Ontario government is considering some changes to the Employment Standards Act and Labour Relations Act that may redefine the franchiser-franchisee relationship in a similar manner, according to Lexpert (http://www.lexpert.ca/articles/).
If this comes to fruition, it could be a game-changer that redefines the face of franchising in the country in a significant way. Franchisors have long tried to walk the narrow line between maintaining their brand integrity while not acting as employees of franchisees, but the possibility of being joint-employers certainly muddies those waters.
A Franchisor's Good Faith Duty
In Quebec, a major franchise brand was found liable for breaching its good faith duty towards franchisees by not enhancing and protecting its brand in the face of increasing competition, as reported by Lexology (http://www.lexology.com/library/). On the flip side, according to Gowling WLG International, an Ontario court found that another large franchisor did not breach its good faith duty toward franchisees in regard to winding down business plans for some locations (https://gowlingwlg.com/en/canada/insights-resources/ontario-court-clarifies-franchise-issues-in-trillium-motor-v-general-motors).
Both of these cases illustrate there is a need for clarification in what good faith means between a franchiser and a franchisee. The rulings also show that franchisors must continue to develop sound practices when it comes to their good faith obligations to their franchisees.
The Healthy Menu Choices Act
Restaurant franchisees have a specific challenge of their own: the Healthy Menu Choices Act. This comes into effect on the first day of January 2017. Under this law, food service locations that sell ready-to-eat food and have at least 20 locations in Ontario will have to post itemized calorie counts and other nutritional information on their menus. While franchisors won't be liable for breaches of the new law by their franchisees, both parties still need to understand their new obligations under the act to avoid any trouble down the road.