Franchising – Presale Disclosure Now Mandatory in British Columbia

For those franchisors offering, or planning to offer, franchises in British Columbia, please take note that effective February 1, 2017, you must now provide a BC-compliant disclosure document to all franchise prospects at least 14 days prior to signing any agreement relating to the franchise, or accepting any payments in respect of the franchise.

Although BC’s franchise Regulation is substantially similar to that of other provinces, your existing disclosure document must be amended to account for a number of BC-specific provisions.

Some of the BC-specific provisions include:

1. The term “officer” is defined to include not just those individuals appointed by resolution, but also any individual who performs functions or acts in a capacity similar to the functions or capacities of an officer appointed by resolution
2. Franchisors who are exempt from financial disclosure must include a statement to that effect
3. Your disclosure relative to alternative dispute resolution must include a discussion of the venue in which the ADR will occur
4. with respect to the cost of establishing a new franchise, BC requires disclosure of any formula used to calculate fees
5. BC requires disclosure as to whether earnings projections are based on actual results and, if so, the locations, areas, territories or markets from which the results are obtained
6. If no earnings projection is provided, BC requires a positive statement to that effect
7. BC requires disclosure of the location of training
8. The table of contents of each manual provided to the franchisee must be disclosed
9. If no manuals are available, a statement to that effect must be included
10. In several locations, BC uses the phrase “franchisors affiliate,” which is potentially much wider than the term “franchisor’s associate,” which is used in most other provinces
11. BC requires disclosure of the franchisor’s policies and practices regarding rebates
12. With respect to disclosure relative to legal compliance, BC requires a mandatory statement that the franchisee may be required under other laws to obtain additional licenses and that the franchisee should make due inquiry
13. BC requires a description of the “extent” to which the franchisee will be required to participate personally in the ongoing operation of the franchise
14. If territorial rights are granted, BC requires a description of the franchisee’s rights to the territory
15. BC requires a description of the manner in which the franchisee’s territorial rights are determined
16. BC also requires identification of the person who will make this determination
17. BC requires disclosure of any reservation of rights to market goods or services of the same kind, whether under the same or a different trademark
18. BC requires disclosure of any reservation of rights to distribute goods or services by Internet sales, telephone sales, catalogue sales or otherwise
19. If no territorial rights are granted, BC requires a statement to that effect
20. If the franchisor listed franchisees from a foreign jurisdiction in its list of operating locations, then it must include any closures that have occurred within those jurisdictions in its list of one year closures
21. If the franchisor or its affiliates have less than 20 franchise locations operating in Canada, then locations operated by the franchisor or its affiliates in any foreign jurisdiction must be disclosed