Updated July 2024
Similar to other franchising laws in Canada, the Arthur Wishart Act (Franchise Disclosure) is designed to create a level playing field between the franchisor and franchisee while promoting cooperation and transparency between both parties. Much of the act focuses on disclosing information to potential franchisees, but it also offers other protections to franchisees.
In Canada, it’s up to each province to create its own franchise laws. In addition to the Arthur Wishart Act in Ontario, the following provinces also have franchising regulations:
Franchise Disclosure Included in the Arthur Wishart Act
The Wishart Act in Ontario requires the franchisor to provide prospective franchisees with a franchise disclosure document (FDD).
What the FDD Contains
The purpose of an FDD is to help potential franchisees make an informed decision about a franchise opportunity. In Ontario, the document must include the following:
- Copies of all agreements relating to the franchise
- Financial statements as stipulated in the Arthur Wishart Act
- All material facts*, including facts as prescribed in the regulation
- Necessary statements to help prospective franchisees make an informed decision
- Other information and copies of documents as prescribed
- Signature(s) of a director or officer
*The Wishart Act describes a “material fact” as any information about the business’ operations, capital or control of the franchisor of the franchise system that can be reasonably expected to have a significant effect on the value of the prices of the franchise or the decision to purchase the franchise.
How the FDD is Delivered
The FDD must be delivered to a prospective franchisee at least 14 days prior to signing the franchise agreement or any other agreements related to the franchise. No payments, including refundable ones, can be made in that 14-day window.
Protections for the Franchisee
The Ontario legislation provides protections for potential franchisees if the franchisor does not adhere to its regulations. A couple to note include:
- If the FDD fails to comply with the Arthur Wishart Act, then the prospective franchisee can terminate the franchise agreement without risk of penalty or any obligation for up to 60 days from the day the FDD was received.
- If the franchisee doesn’t receive an FDD, then they can cancel the agreement up to two years without risk of penalty.
If the franchisee rescinds the franchise agreement because the FDD was not received or was not complete, then the franchisor must do the following within 60 days of the agreement being rescinded:
- Refund the franchise fee and any other money it received from the franchisee or on behalf of the franchisee except money for inventory, supplies or equipment.
- Purchase any inventory, supplies and equipment from the franchisee at a price equal to the purchase price the franchisee paid.
- Compensate the franchisee for any losses they may have incurred while acquiring and operating the franchise.
Additional Elements of the Arthur Wishart Act?
A Duty of Fair Dealing
As is common with franchising laws in other Canadian provinces, the Arthur Wishart Act imposes a duty of fair dealing upon both parties. This means that both parties must act in good faith and in accordance with reasonable commercial standards. If this duty of fair dealing is not upheld, either party can sue the other for damages.
The term “good faith” isn’t actually defined within the Wishart Act itself, but some obvious tenants of good faith include:
- Parties must not lie to each other
- Parties must not withhold important information from each other
- Parties must not act in a way that compromises the purpose of the franchise agreement
What constitutes good, and conversely, bad faith is decided on a case-by-case basis in the court system. If both franchisors and franchisees are transparent and fair with each other, there shouldn’t be any issues in this regard.
Right of Association
Another protection the Wishart Act provides for franchisees in Ontario is the right to associate with each other. This means that franchisees within a system can freely form or join any organization of franchisees without risking penalization from the franchisor. This is meant to promote free discussion among franchisees.
Looking to Buy a Franchise in Ontario?
If you’re interested in buying a franchise in Ontario or in any other province, FranNet can help. Our expert franchise consultants will evaluate your goals and abilities and match you with the right franchise opportunity. Schedule your free consultation to get started!