UTGB Vol 5.pdf - Robson Hall Faculty of Law

104 Underneath the Golden Boy
definition of "franchise agreement." Accordingly, and unlike Ontario, these
agreements may be entered into in advance of a disclosure document being
given. 75 If the franchise is a turnkey operation, where the franchisor is in charge
of development and selection of premises and the franchisee simply has to
unlock the door to begin operating its business, no site selection agreement is
needed. However, when the franchisee is partially or completely responsible for
choosing and developing the location, a site selection agreement will be
needed. 76
A site selection agreement is a breed of commitment agreement. Under a
commitment letter, the supposed franchisee's pre,opening obligation is to
procure premises for the franchised business. The site selection agreement may
impose certain site and lease criteria and approvals with which the franchisee
must comply in order to move forward with the development of the franchise.
Often, the site selection agreement requires the franchisor to review it promptly
and to approve or reject the site. 77
The ULCC recommends that an agreement which is restricted to designation of
a location should be able to be entered into prior to disclosure and should
therefore be exempt from disclosure. A prospective franchisee would not be
prejudiced in this regard. 76 Consequently, s. 10 of the UFA states that an
agreement is not a franchise agreement or any other agreement relating to the
franchise if the agreement only contains terms in respect of designating a
location, site or territory for a prospective franchisee.
In theory, receiving the site selection agreement before the disclosure document
could be beneficial for the franchisee. This is because rather than having to
become familiar with a very large document prior to signing the Franchise
Agreement, the franchisee will have more time to consider each document
separately. Consequently, allowing a franchisor to issue a site selection
document prior to the disclosure document will result in a franchisee being able
to make a well,informed decision. In other words, having become well
acquainted with both documents due to the added reading time, a franchisee
will be more informed when making the decision to purchase. Thus, Manitoba's
legislation should follow Alberta, P.E.I. and the ULCC and exclude site
75
Larry Weinberg, "Franchise Law e LERT - Canadian Franchise Law Legislative
Updates/' online: Cassels Brock Resources .
76
Zaid, supra note 67 at 14.
77
Kevin M. Shelley & Jonathan J. TorontoJ "Preliminary Agreements: How to Avoid
Unintended Contractual Obligations," (Fall 2005) 25:2 Franchise Law Journal 47 at 53; or
online: Franchise Law Journal .
78
Levitt, supra note 64.