UTGB Vol 5.pdf - Robson Hall Faculty of Law

easonable time to remedy the breach. A "reasonable time" is, however, limited
by the subsequent section to no more than 30 days. 114 Similarly, the California
Franchise Relations Act requires that a franchisee's reasonable opportunity to
cure the failure should not exceed 30 days. 115
Manitoba should follow Australia and California's example in setting a 30 day
limit. Iowa's limit of 90 days appears to be an excessive time in which to require a
franchisor to endure a defaulting franchisee. Adopting a shorter limit will
induce a franchisee to cure the default faster, to the franchise's benefit, and
shall have no detrimental effect on the franchisee. In addition, Manitoba could
introduce an exception to this limit when the parties initially agree to a longer,
but never shorter, period through the franchise agreement. To provide a further
incentive for a franchisee to comply, the termination clause in a franchise
agreement should be statutorily required to include a liquidated damages
section, whereby a franchisor establishes what a franchisee will have to pay in
compensation in case of failure to remedy the default. Non,compliance with the
request to cure the default should render the contract void, allowing the
franchisor to sell the franchise to other potential franchisees.
It is important to note that Iowa's legislation covers the termination by a
franchisor in instances where the franchisee is in default. What happens when
the franchisor simply wants to terminate the contract for no particular reason
Manitoba should introduce a section addressing this issue as well. In doing so,
Manitoba's franchise legislation should allow a franchisor wishing to terminate
the franchise agreement without good cause to do so, only after paying a
penalty. Upon termination, a franchisor would have to pay the pro rata value of
the franchise plus a portion of the cost of the business as assessed by an
independent business advisor. For instance, if the franchisee had originally paid a
$250 000 franchise fee for a five,year period and the contract is cancelled on
year four, then the franchisor should pay the franchisee $50 000, which is the
amount the franchisee had paid per year under the agreement. Introducing such
a clause would not only ensure that franchisors exercise caution in terminating
agreements, but also ensure that franchisees who had counted on the
franchise's income still manage to receive it.
By adopting such legislation, Manitoba would become the first Canadian
jurisdiction to protect franchisees from contract termination while providing
franchisors with a guideline as to what steps to take in order to terminate a
franchise contract adequately.
114
Australia, Trade Practices (Industry Codes- Franchising) Regulations 1998, supra note 50 at
ss. 21(2)(c) and 21(3).
115
Cal. Bus. & Prof.Code §20020.