Franchisor’s obligation to disclose
5 (1) A franchisor shall provide a prospective franchisee with a disclosure document and the prospective franchisee shall receive the disclosure document not less than 14 days before the earlier of, (a) the signing by the prospective franchisee of the franchise agreement or any other agreement relating to the franchise, other than an agreement described in subsection (1.1); and (b) the payment of any consideration by or on behalf of the prospective franchisee to the franchisor or franchisor’s associate relating to the franchise, excluding the payment of a deposit if it, (i) does not exceed the prescribed amount, (ii) is refundable without any deductions, and (iii) is given under an agreement that in no way binds the prospective franchisee to enter into a franchise agreement. 2000, c. 3, s. 5 (1); 2017, c. 20, Sched. 9, s. 3 (1). Exception (1.1) Clauses (1) (a) and (5) (a) do not apply to an agreement if it only contains terms that, (a) require any information or material that may be provided to a prospective franchisee to be kept confidential; (b) prohibit the use of any information or material that may be provided to a prospective franchisee; or (c) designate a location, site or territory for a prospective franchisee. 2017, c. 20, Sched. 9, s. 3 (2). Same (1.2) Despite subsection (1.1), clauses (1) (a) and (5) (a) apply to an agreement if it contains terms that, (a) require information to be kept confidential or prohibit the use of information, if the information, (i) is or comes into the public domain other than as a result of a contravention of the agreement, (ii) is disclosed to any person other than as a result of a contravention of the agreement, or (iii) is disclosed with the consent of all the parties to the agreement; or (b) prohibit the disclosure of information to an organization of franchisees, other franchisees of the same franchise system or a franchisee’s professional advisors. 2017, c. 20, Sched. 9, s. 3 (2). Methods of delivery (2) A disclosure document may be delivered personally, by registered mail or by any other prescribed method. 2000, c. 3, s. 5 (2). Same (3) A disclosure document must be one document, delivered as required under subsections (1) and (2) as one document at one time. 2000, c. 3, s. 5 (3). Contents of disclosure document (4) The disclosure document shall contain, (a) all material facts, including material facts as prescribed; (b) financial statements as prescribed; (c) copies of all proposed franchise agreements and other agreements relating to the franchise to be signed by the prospective franchisee; (d) statements as prescribed for the purposes of assisting the prospective franchisee in making informed investment decisions; and (e) other information and copies of documents as prescribed. 2000, c. 3, s. 5 (4). Material change (5) The franchisor shall provide the prospective franchisee with a written statement of any material change, and the franchisee must receive such statement, as soon as practicable after the change has occurred and before the earlier of, (a) the signing by the prospective franchisee of the franchise agreement or any other agreement relating to the franchise, other than an agreement described in subsection (1.1); and (b) the payment of any consideration by or on behalf of the prospective franchisee to the franchisor or franchisor’s associate relating to the franchise, excluding the payment of a deposit if it, (i) does not exceed the prescribed amount, (ii) is refundable without any deductions, and (iii) is given under an agreement that in no way binds the prospective franchisee to enter into a franchise agreement. 2000, c. 3, s. 5 (5); 2017, c. 20, Sched. 9, s. 3 (3). Contents of statement (5.1) A statement of material change shall contain the information that is prescribed. 2017, c. 20, Sched. 9, s. 3 (4). Information to be accurate, clear, concise (6) All information in a disclosure document and a statement of a material change shall be accurately, clearly and concisely set out. 2000, c. 3, s. 5 (6). Exemptions (7) This section does not apply to, (a) the grant of a franchise by a franchisee if, (i) the franchisee is not the franchisor, an associate of the franchisor or a director, officer or employee of the franchisor or of the franchisor’s associate, (ii) the grant of the franchise is for the franchisee’s own account, (iii) in the case of a master franchise, the entire franchise is granted, and (iv) the grant of the franchise is not effected by or through the franchisor; (b) the grant of a franchise to a person for the person’s own account or to a corporation that the person controls if the person, (i) has been an officer or director of the franchisor or of the franchisor’s associate for at least six months and is currently such an officer or director, or (ii) was an officer or director of the franchisor or of the franchisor’s associate for at least six months and not more than four months have passed since the person was such an officer or director; (c) the grant of an additional franchise to an existing franchisee if that additional franchise is substantially the same as the existing franchise that the franchisee is operating and if there has been no material change since the existing franchise agreement or latest renewal or extension of the existing franchise agreement was entered into; (d) the grant of a franchise by an executor, administrator, sheriff, receiver, trustee, trustee in bankruptcy or guardian on behalf of a person other than the franchisor or the estate of the franchisor; (e) the grant of a franchise to a person to sell goods or services within a business in which that person has an interest if the sales arising from those goods or services during the first year of operation of the franchise, as anticipated by the parties or that should be anticipated by the parties at the time the franchise agreement is entered into, do not exceed, in relation to the total sales of the business during that year, a prescribed percentage; (f) the renewal or extension of a franchise agreement where there has been no interruption in the operation of the business operated by the franchisee under the franchise agreement and there has been no material change since the franchise agreement or latest renewal or extension of the franchise agreement was entered into; (g) the grant of a franchise if, (i) the prospective franchisee is required to make a total initial investment, determined in the prescribed manner, of an amount that does not exceed a prescribed amount, (ii) the franchise agreement is not valid for longer than one year and does not involve the payment of a non-refundable franchise fee, or (iii) the franchisor is governed by section 55 of the Competition Act (Canada); (h) the grant of a franchise if the prospective franchisee is required to make a total initial investment, determined in the prescribed manner, of an amount that is greater than a prescribed amount. 2000, c. 3, s. 5 (7); 2017, c. 20, Sched. 9, s. 3 (5-8). Same (8) For the purpose of subclause (7) (a) (iv), a grant is not effected by or through a franchisor merely because, (a) the franchisor has a right, exercisable on reasonable grounds, to approve or disapprove the grant; or (b) a transfer fee must be paid to the franchisor in an amount set out in the franchise agreement or in an amount that does not exceed the reasonable actual costs incurred by the franchisor to process the grant.  2000, c. 3, s. 5 (8). Section Amendments with date in force (d/m/y) 2017, c. 20, Sched. 9, s. 3 (1-8) - 01/09/2020