UTGB Vol 5.pdf - Robson Hall Faculty of Law

116 Underneath the Golden Boy
ii.Renewal of Contract
The franchise agreement may include a right of renewal for the franchisee,
which would be exercisable only if the franchisee has complied with certain
conditions. Typical conditions precedent to the exercise of a renewal option are
that the franchisee (i) is in good standing under the franchise agreement and all
other agreements with the franchisor; (ii) provides to the franchisor written
notice of its intent to renew; (iii) agrees to execute the then current standard
franchise agreement used by the franchisor for the grant of new franchises; and
(iv) agrees to pay the franchisor a renewal fee. 116 In the absence of renewal. the
franchisor will be free to retain, re...license, close, or re...organize the business for
its own account. 117
Since Manitoba courts have yet to hear a franchise renewal case, it is necessary
to look to other jurisdictions to determine if the common law already provides
sufficient protection upon renewal. In Sultani v. Blenz The Canadian Coffee
Co., 118 the British Columbia Supreme Court held that a duty of fair dealing
imposed on a franchisor does not go so far as to compel a party to renew an
expiring relationship when it is not commercially reasonable to do so, and
where there is no express right of renewal contained in the agreement. In
Thompson v, Cinnaroll Bakeries Ltd., 119 the Alberta Court of Queen's Bench held
that, according to the franchise agreement, the franchisee was bound to renew
the contract unless significant changes had been made to the original contract,
such as an increase in royalty payments and loss of exclusivity in a specific
market.
The precedent established by renewal cases fails to adequately address the
renewal of franchise agreements. It fails to deal with situations where oral
promises to renew are not upheld as well as instances where the franchise
agreement does not mention the option of renewal, where franchise parties are
not bound to exercise good faith and fair dealing. It is clear that legislation is
necessary to complement the common law, forcing parties to exercise their best
business behavior when dealing with each other upon renewal.
Having established that Manitoba is in need of renewal provisions, one s:10uld
consider how other jurisdictions with franchise legislation address the matter.
Since none of the Canadian provinces with franchise regulation include renewal
clause, one must look abroad. The United States, having implemented
116
Zaid, supra nate 67 at 14.
111 Paul J. Bates & R. David House, "Canadian Franchise Disputes/' (Paper presented to the
6th Annual Franchise Conference: The Domino Effect, November 2006) [Toronto: Ontario
Bar Association Continuing Legal Education) at 10.
118
[2005] B.C.J. No. 846.
119 [2002] ABQB 1112.