Bill 102 2010
An Act to amend the Arthur Wishart Act (Franchise Disclosure), 2000
Note: This Act amends the Arthur Wishart Act (Franchise Disclosure), 2000. For the legislative history of the Act, see the Table of Consolidated Public Statutes – Detailed Legislative History at www.e-Laws.gov.on.ca.
Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:
1. The Arthur Wishart Act (Franchise Disclosure), 2000 is amended by adding the following section:
5.1 (1) Before or at the same time that a franchisor provides a prospective franchisee with a disclosure document under subsection 5 (1), the franchisor shall provide the prospective franchisee with an educational document setting out the following in respect of the decision to enter into the franchise agreement:
1. Self-evaluation criteria for the prospective franchisee to consider, including,
i. whether the prospective franchisee has the capital required for investment,
ii. whether the prospective franchisee has the necessary management skills, education and work experience,
iii. whether the prospective franchisee is fully aware of the work involved in operating the business associated with the franchise and whether the prospective franchisee can work within the limits of a franchise system,
iv. what would be the best franchise for the prospective franchisee, based on consideration of,
A. lines of business that are successful and that are expected to continue to succeed, and
B. lines of business in respect of which the prospective franchisee is interested, and
v. whether entering into the franchise agreement is the only means by which the prospective franchisee may succeed in engaging in the line of business in which the prospective franchisee is interested.
2. Issues for the prospective franchisee to consider in respect of the franchisor and the businesses associated with the franchise, including,
i. the franchisor's background and how long the franchisor has been offering franchises,
ii. the financial stability of the businesses associated with the franchise,
iii. the extent to which the franchisor is selective when choosing prospective franchisees, including whether the franchisor requested the qualifications and financial standing of the prospective franchisee,
iv. the directors, general partners and the officers of the franchisor and their levels of experience,
v. how many businesses associated with the franchise are operating currently, whether new locations are being opened on a regular basis and whether any locations have failed,
vi. if the franchise is new, the record of accomplishment of the businesses associated with the franchise,
vii. whether the franchisor has introduced any new innovations,
viii. whether the prospective franchisee has been advised by the franchisor to meet with existing franchisees, and
ix. whether the franchisor provides local ongoing training for franchisees.
3. Issues for the prospective franchisee to consider with respect to the goods or services to be sold, offered for sale or distributed, including,
i. what makes the goods or services unique,
ii. whether there is a reasonable demand for the goods or services, including whether there has been an increase or decrease in sales and whether demand is seasonal,
iii. whether the prospective franchisee may carry other lines of goods or offer other services,
iv. whether the goods or services are priced competitively with similar goods or services, and
v. if goods will be sold, offered for sale or distributed,
A. whether the franchisor can guarantee continual supply at a fair price,
B. whether there are warranties or guarantees and who is responsible for them,
C. whether the goods are protected by a patent, trademark or copyright, and
D. whether the prospective franchisee would be permitted to purchase goods from other suppliers when inventory levels become low or if the supply from the franchisor is interrupted and while waiting for the franchisor's goods to arrive.
4. Issues for the prospective franchisee to consider with respect to location and sales territory, including,
i. whether the territory is clearly defined and exclusive, and what guarantees are provided,
ii. the sales potential for the territory and whether the franchisor has provided the prospective franchisee with market information and statistics in support of the sales potential,
iii. the future growth potential of the territory,
iv. whether the prospective franchisee may select the location and whether there are flexible standards for location and premises,
v. whether the prospective franchisee will own or lease the location and the related terms, and
vi. competition in the territory.
5. A statement that the prospective franchisee may ask the franchisor for a list of other franchisees operating in the area.
6. Issues that the prospective franchisee may wish to raise with other franchisees, including,
i. the total investment required by the franchisor,
ii. any hidden or unexpected costs,
iii. the franchisee's level of satisfaction with the quality of the goods provided by the franchisor,
iv. the frequency and reliability of deliveries from the franchisor,
v. the length of time before the franchisee's operating expenses were covered by revenue, and the length of time before the franchisee drew a reasonable salary,
vi. whether the projected sales and profit figures provided by the franchisor were accurate and whether profits have met the franchisee's expectations,
vii. the quality, location and funding of management and staff training,
viii. any serious disagreement with the franchisor, the nature of the disagreement and the resolution,
ix. the franchisor's promptness and helpfulness in responding to questions from the franchisee,
x. the franchisee's level of satisfaction with marketing, promotional and advertising assistance from the franchisor,
xi. whether the franchisee would prefer to change any terms of the agreement,
xii. whether the franchisee would recommend entering into a franchise agreement with the franchisor, and
xiii. what steps the franchisee has taken to be successful.
7. A statement that it is advisable to have a lawyer and an accountant review the entire franchise agreement, particularly with respect to bankruptcy, termination, renewal, transfer and sale of the franchise.
8. Issues for the prospective franchisee to consider with respect to the franchise agreement, including,
i. whether the agreement protects the prospective franchisee as well as the franchisor,
ii. whether the rights and obligations of both parties are clearly stated,
iii. whether the agreement is specific as to the type and size of the operation that will be managed,
iv. whether the nature, duration, cost and extent of the prospective franchisee's training are outlined in the agreement,
v. whether the payments to the franchisor are clearly specified, including the franchise fee, any other fixed yearly payments to the franchisor, royalty payments, advertising payments and fees for continuing services provided by the franchisor,
vi. whether the prospective franchisee is required to purchase essential supplies from the franchisor or from designated suppliers and whether a minimum amount of merchandise must be purchased from the franchisor in each year,
vii. whether the prospective franchisee has a right to the franchisor's latest innovations,
viii. whether there is an annual sales quota and whether it is attainable,
ix. what types of reports are required to be provided to the franchisor,
x. whether the agreement covers in detail any verbal promises made by the franchisor,
xi. whether the franchisor will maintain any necessary federal and provincial registrations,
xii. whether the agreement can be renewed and the applicable terms,
xiii. whether royalty payments may be deferred to a later, more profitable month in the case of a monthly loss,
xiv. whether the prospective franchisee is required to follow franchisor controls and policies exactly, or whether some creativity regarding the goods or services and their delivery may be exercised,
xv. if the location is to be leased, whether the lease is for the same term as the agreement and whether the lease can be renewed upon renewal of the agreement,
xvi. whether the prospective franchisee is responsible for the construction or improvement of any premises and, if so, whether the franchisor will provide plans and specifications, and whether the plans and specifications may be altered,
xvii. the extent to which the prospective franchisee may choose the territory or location,
xviii. whether the prospective franchisee may sell the franchise and the applicable conditions, including whether any profits from the sale may be kept by the prospective franchisee and how the sale price is determined,
xix. how the prospective franchisee will be compensated for goodwill built up in the business associated with the franchise,
xx. whether the prospective franchisee or the franchisor can terminate the franchise and any applicable terms, including any penalties,
xxi. how much time the prospective franchisee will have to rectify a situation if there is a default on the agreement, and whether there is an arbitration clause regarding defaults,
xxii. what happens to the business in the event of prolonged illness or death of the prospective franchisee and whether succession is addressed clearly,
xxiii. whether the prospective franchisee is prohibited from engaging in any other business activity for the duration of the agreement, and
xxiv. whether the prospective franchisee is prohibited from establishing, owning or working in a competing business for a certain number of years after termination of the agreement.
9. Any other prescribed information.
Acknowledgment of prospective franchisee
(2) Before entering into a franchise agreement on or after the day this section comes into force, a prospective franchisee shall provide the franchisor with a signed, written acknowledgment that, at the time of entering into the agreement, the franchisee has reviewed the educational document mentioned in subsection (1).
2. Subsection 14 (1) of the Act is amended by adding the following clause:
(j.1) prescribing matters for the purpose of paragraph 9 of subsection 5.1 (1);
3. This Act comes into force on a day to be named by proclamation of the Lieutenant Governor.
4. The short title of this Act is the Arthur Wishart Amendment Act (Franchise Disclosure), 2010.
The Bill amends the Arthur Wishart Act (Franchise Disclosure), 2000 to require a franchisor to provide a prospective franchisee with an educational document containing specified information. Before entering into the agreement, the prospective franchisee is required to provide the franchisor with a signed, written acknowledgment that the franchisee has examined the educational document.