British Columbia franchise law could become a reality

Government is currently seeking comment on proposed legislation

The B.C. Ministry of Justice is currently seeking feedback from the public and stakeholders on the province’s proposed B.C. Franchises Act, according to the Globe and Mail. If passed into law, the act would bring B.C. law in line with the franchise laws already enjoyed by other Canadian provinces and the U.S. Analysts say the law, which primarily affects disclosure rules, should be welcomed by both franchisors and franchisees.

Pre-contract disclosure

One of the most important pieces of the proposed legislation concerns the franchise disclosure document (FDD). Under the law, an FDD would be provided to a prospective franchisee before a contract is signed or money is paid to the franchisor.

The FDD requires the franchisor to disclose certain information to the franchisee, such as the franchisor’s history, litigation involving the franchisor, financial statements, full costs of establishing the franchise, and other important pieces of information. The law would also give franchisees a two-week “cooling off” period in order to seek professional advice before an investment is made or a contract goes into force. The law would also provide franchisees with legal remedies if a franchisor does not fully comply with the disclosure rules.

Support for law

According to the Financial Post, the proposed law, which has yet to be introduced in the legislature and could still undergo changes, should be supported by both franchisors and franchisees. The law is largely the same as comparable legislation in five other Canadian provinces and throughout the U.S., meaning that franchisors will have little difficulty complying with the new law.

Franchisees will also enjoy greater protections under the law. For example, the full disclosure laws will allow potential franchisees to learn if other franchisees have taken legal proceedings against the franchisor. Additionally, the proposed law requires legal disputes to be carried out in British Columbia and under provincial law. Under the current system, franchisees can find their case against a franchisor in a New York or Toronto court, meaning many franchisees choose not to pursue their case because of the punitive legal costs of conducting it in a distant jurisdiction.

Legal advice for businesses

With B.C. inching closer to a franchise law, both franchisors and franchisees should look at the proposed legislation as a reminder of how important legal advice is during any business transaction. An experienced business lawyer can provide franchisors and franchisees with the assistance and guidance they need when resolving any legal issue. With expert legal advice, business owners can ensure legal compliance and thus focus their efforts on their business’ stability and future growth.

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