Nice to see an article in the Financial Post (Franchise agreements key to success) emphasizing the practical and legal importance of getting a franchise agreement and disclosure statement right. It highlights for franchisors and franchisees alike that starting off on the same page with a proper franchise agreement and a detailed disclosure statement is the key to a long term relationship and a successful franchise business venture.
The article also serves as a good reminder to clients that they need to follow the advice and instructions of their lawyers to make sure all the legal requirements of a franchise arrangement are met. The Financial Post article very much echoes the sentiments of an article in the just released LAWPRO Magazine: Franchise law tenet: Disclosure! Disclosure! Disclosure!.
In Ontario, franchises are governed by the Arthur Wishart Act (Franchise Disclosure), 2000. It was enacted to provide protection to franchisees in relation to their dealings with franchisors, and to address the imbalance of power that exists between the parties. This Act has very complex requirements in terms of what the franchisor must disclose to the franchisee.
Unfortunately, LAWPRO is seeing an increase in claims against lawyers by franchisees and franchisors, frequently because disclosure obligations were not met. If you do work in this area please read the Franchise law tenet: Disclosure! Disclosure! Disclosure! article and make sure you are familiar with the Arthur Wishart Act.