BC’s Franchises Act Came Into Force On February 1, 2017


Feb 02, 2017

This new legislation has been assembled over the past 4 years in an effort to level the negotiation positions of both Franchisors and prospective franchisees. In most cases, prospective franchisees are not as business savvy as the franchisors.  They face disadvantages and do not have access to the same resources as the franchisors.  There have been cases where franchisees have accused, and even taken Franchisors to court, for not properly disclosing their financial situation and overvaluing their venture.

New legislation will prevent Franchisors from sneaking in lease clauses, hiding financial numbers and presenting projections for new prospective franchisees.

According to the CFA, the franchise industry is a $68 billion industry that employs over 7% of the Canadian work force.  BC, was somewhat slow in coming up with this legislation as other provinces like Alberta which has had a Franchise Act since 1980. BC’s Law Institute indicated the need to bring BC’s Franchise practices into line with principles of the 1995 Agreement on Internal Trade, which aims for an understanding of the regulatory trade standards between provinces.

The new Franchises Act and Regulations will be advantageous to Franchisors as well, as not only will they face fairer competition against franchisors that have misrepresented their financial numbers or sneaked in clauses, but they will also reduce the possibility of prospective franchisees complaining of misinformation.

According to the new legislation, franchisors will be obligated to provide prospective franchisees disclosure documentation before signing the actual franchise agreement between the two parties. This approach not only increases the franchisee’s ability be certain of an informed signed franchise agreement, but also protects franchisors from potential future complaints of deception or from lack of disclosure information.

In most cases, prominent franchises with units across Canada already exercise fair practices and follow rules and regulations when dealing with prospective franchisees, as they have already been doing it for other provinces for some time.