UTGB Vol 5.pdf - Robson Hall Faculty of Law

108 Underneath the Golden Boy
Regardless of the specific requirements behind Alberta and Ontario's
exemptions, incorporating them into Manitoba's legislation is a sensible idea.
Taking only the first two steps in each test in consideration, it is clear that only
those franchisors who are so large and well established that very little doubt
may exist as to their financial status will be exempt from delivering financial
statements. This means that a franchisee will still be able to make an informed
decision, knowing that no disclosure document was provided because of the
franchisor's size. However, if Manitoba were to incorporate this exemption, a
provision should be added allowing a franchisee to still demand financial
statements. If the franchisee is required to invest a very large sum in order to
acquire the franchise, s/he should be able to consider the company's financial
situation by looking at a statement. Assuming that this is a very sensitive topic
for the franchisor, the franchisee may be required to sign a confidentiality
agreement that the financial statements will not be disclosed to anyone outside
the franchise, thus successfully protecting such sensitive information. Ideally,
Manitoba should introduce a liquidity test, since a franchise may have m
ostensibly good net,worth but be illiquid. However, doing so would make
Manitoba too strict, possibly deterring incoming franchisors.
What of the third step in Ontario's test The requirement that the franchisor,
its associates, officers, directors or general partners have not had any judgments
made against them relating to fraud, unfair or deceptive business practices or a
law regulating franchises should be included in Manitoba's franchise legislation.
Although it may not be specifically related to financial issues, legislation should
require a franchisor to be as transparent as possible, especially where they have
been charged or convicted of such offences.
In conclusion, Manitoba should adopt the exemption in question to allow large
franchisors to refrain from disclosing sensitive financial information.
Furthermore, Ontario's provision should be adopted with an addendum
allowing a franchisee to request disclosure of financial documents where the
franchisor has applied for an exemption. If the request is granted, the franchisor
should be allowed to require the franchisee to sign a confidentiality agreement
protecting all financial information.
C.. Franchise Relationship Regulation
The relationship between a franchisor and his franchisees has often been
likened to a partnership or marriage. These analogies are valid because of the
interdependence of the parties, the division of responsibilities, the collective
effort for the common good and the sharing of the fruits of that effort. But like a
partnership or marriage, a franchise relationship can turn sour and become a