On February 1, 2017, the Franchises Act S.B.C. 2015, c. 35 (the “Act”) came into force in the province of British Columbia, Canada.
What this means for franchising in British Columbia:
The most important implication for franchisors with operations in British Columbia (“BC”) will be the franchise disclosure requirements stipulated under section 5 of the Act, and as prescribed by the Franchises Regulation, B.C. Reg. 238/2016 (the “Regulation”). Much like the existing legislation in Ontario and Alberta, the Act requires that a franchisor provide a prospective franchisee with a disclosure document at least 14 days prior to the earlier of:
(a) the signing, by the prospective franchisee, of the franchise agreement or any other agreement relating to the franchise; and
(b) the payment, by or on behalf of the prospective franchisee to the franchisor or the franchisor’s associate, of any consideration relating to the franchise.
This 14-day “cooling off” period is identical to the requirements in Ontario under the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 and ensures that franchisees have adequate time to consider their investment in the franchise system with their legal and tax advisors without being pressured by overzealous franchisors.
An immediate benefit to franchisees in BC is that the cooling off period prevents franchisors from collecting any fees or non-refundable deposits or any other form of consideration relating to the franchise. Currently, deposits and other monetary expressions of interest are common in BC, which places additional pressure on a prospective franchisee to sign the franchise agreement. The legislation will stop this practice and provide prospective franchisees in BC with some breathing room during their deliberations.
Notwithstanding the additional costs for franchisors which will be incurred by virtue of the preparation of disclosure documents for BC franchisees, for those franchisors who are already operating in the other disclosure jurisdictions, “wrap around” language in the current disclosure document should be relatively easy to implement, given the similarities between the Act and franchise legislation in the other Canadian disclosure jurisdictions.
Unfortunately, those franchisors who are currently operating solely in BC or in other jurisdictions that do not require disclosure, will have to incur the not insignificant cost of preparing a disclosure document which meets the requirements of the Act.