Franchises' Arbitrations Act, 1996


The Bill provides for the arbitration of disputes between the parties to a franchise agreement with respect to a fundamental term of the agreement.


An Act to provide for the Arbitration of

certain Disputes relating to Franchises

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

1. (1) In this Act,

"associate", when used to indicate a relationship with any person, means,

(a) a corporation of which the person beneficially owns or controls, directly or indirectly, voting securities entitling the person to more than 10 per cent of the voting rights attached to the outstanding securities of the corporation,

(b) if the person is a corporation, another corporation that is an affiliate within the meaning of subsection (2),

(c) a trust or estate,

(i) in which the person has a beneficial interest, or

(ii) in respect of which the person serves as trustee or in a similar capacity,

(d) if the person is an individual,

(i) the spouse or child of the individual, or

(ii) any relative of the individual or of the spouse of the individual who has the same residence as the individual, or

(e) a partner or joint trustee of the persons; ("personne qui a un lien")

"franchise" means,

(a) a right to engage in a business,

(i) in which goods or services are sold or offered for sale or are distributed under a marketing or business plan required or suggested in substantial part by the franchisor or its associate,

(ii) that is substantially associated with a trademark, trade name, trade secret or advertising or commercial symbol of the franchisor or its associate or designating the franchisor or its associate, or with a patent owned by or licensed to the franchisor or its associate, and

(iii) in which there is a continuing financial interest between the franchisor or its associate and the franchisee with respect to the operation of the franchised business or that required or requires the payment of a franchise fee to the franchisor or its associate,

(b) a master franchise, or

(c) any business or arrangement prescribed to be a franchise for the purposes of this Act; ("franchise")

"franchise agreement" means a written agreement between a franchisor or its associate and the franchisee or prospective franchisee, as the case may be, that relates to a franchise; ("contrat de franchisage")

"franchisee" means a person to whom a franchise is granted and includes a subfranchisee who is granted a franchise by the franchisee to a master franchise agreement; ("franchisé")

"franchisor" means a person who grants a franchise and includes, a franchisee to a master franchise agreement who grants a franchise to a subfranchisee; ("franchiseur")

"master franchise" means the right granted by a franchisor to a franchisee to sell or offer franchises for the franchisee's own account. ("franchise maîtresse")

Meaning of "affiliate"

(2) A corporation is an affiliate of another corporation where one of them is the subsidiary of the other, where both are subsidiaries of the same corporation or where each of them is controlled by the same person.

Meaning of "control"

(3) A corporation is controlled by another person where,

(a) the voting securities of the corporation carrying more than 50 per cent of the votes that may be cast to elect directors are held, other than for the purpose of collateral for a debt, by or for the benefit of the other person; and

(b) the votes carried by the securities referred to in clause (a) are sufficient, if exercised, to elect a majority of the board of directors of the corporation.

Meaning of "subsidiary"

(4) A corporation is a subsidiary of another corporation where,

(a) it is controlled by,

(i) the other corporation,

(ii) the other corporation and one or more corporations, each of which is controlled by the other corporation, or

(iii) two or more corporations, each of which is controlled by the other corporation; or

(b) it is a subsidiary of a corporation that is the other corporation's subsidiary.


2. In the case of a dispute between a franchisor and a franchisee with respect to a fundamental term of the franchise agreement, either party may require that the matter be determined by arbitration under the Arbitration Act, 1991 by giving the other party notice to that effect.

On-going proceedings

3. (1) Section 2 applies with respect to a dispute referred to in that section that, on the day this Act comes into force, is the subject of a proceeding before a court.


(2) Upon application of a party to a proceeding described in subsection (1), a judge shall adjourn the matter indefinitely.


4. The Lieutenant Governor in Council may make regulations,

(a) prescribing businesses or arrangements for the purposes of clause (c) of the definition of "franchise" in subsection 1 (1);

(b) with respect to any matter that is necessary or advisable for the administration of this Act.

Act prevails

5. If a provision of this Act conflicts with any provision of a franchise agreement, this Act prevails.


6. This Act comes into force on the day it receives Royal Assent.

Short title

7. The short title of this Act is the Franchises' Arbitration Act, 1996.