March 31 2016   Hugues Boisvert Founder & CEO, Business Lawyer

If you are looking to get involved in the franchise business in Ontario, you need to be aware of the Arthur Wishart Act. Specifically, if you are looking to sell or buy a franchise, the disclosure requirements outlined in the Act will be of interest to you. Under the Act, the franchisor is obligated to provide a prospective franchisee with a disclosure document no later than 14 days before the earlier of (1) the date of the signing of the franchise agreement and (2) the date of the payment of consideration by the franchisee to the franchisor. The disclosure document must be one document and delivered to the prospective franchisee personally or by registered mail.

There are 5 elements that must be contained in the disclosure document as outlined in subsection 5(4) of the Act:

  1. All material facts, including material facts as prescribed

As set out in subsection 1(1) of the Act, material facts are any information such as those that relate to the business, operations, and the franchise system that would reasonably be expected to have a significant effect on the value or price of the franchise to be granted or the decision to acquire the franchise. Examples include the franchisee’s costs associated with the establishment of the franchise and a description of any training or other assistance offered to franchisees by the franchisor.

  1. Financial statements as prescribed

The financial statements must be audited and reviewed in accordance with the generally accepted auditing and accounting principles that are at least equivalent to those set out in the Canadian Institute of Chartered Accountants Handbook.

  1. Copies of all proposed franchise agreements and other agreements relating to the franchise to be signed by the prospective franchisee

The proposed franchise agreements and any other relevant agreements must be provided to the prospective franchisee.

  1. Statements as prescribed for the purposes of assisting the prospective franchisee in making informed investment decisions

Examples include a commercial credit report on the franchisor’s business background and independent legal and financial advice in relation to the franchise agreement.

  1. Other information and copies of documents as prescribed

Examples include the business background of the franchisor and details of any bankruptcy or insolvency proceedings against the franchisor.

This article is for informational purposes only and does not constitute legal advice. If you wish to discuss your issue with a lawyer, contact Hugues today.  613-747-2459 ext.304,