UTGB Vol 5.pdf - Robson Hall Faculty of Law

Iowa and allow non renewal only where good cause exists. This will ensure that
franchisors will not capriciously refuse to renew franchise agreements.
Moreover, the provision allowing a franchisor the right of non renewal upon
withdrawing from distributing its products in a certain area should be qualified
by a provision forbidding the franchisor from re entering the same area for a
reasonable time. This time may range from six months to one year.
Neither the common law nor current legislation deal with situations where a
franchisee wishes to renew the agreement but at a different location. This may
occur in situations where the franchisee believes in the franchise, but the
location has proven unfavorable. Manitoba legislation should address such
situations by allowing franchisees the right to renew the agreement in such
instances. However, this right should be limited to a certain distance from the
original location. Doing so will allow the franchisor to expand the franchise
while still allowing current franchisees to run successful operations.
In conclusion, Manitoba should include a renewal section for the following
reasons. First, granting the franchisee a six month notice period allows him/her
the opportunity to make post-franchise arrangements. Second, if the parties
agree not to renew, the franchise agreement should be allowed to expire. Third,
if the franchisor is withdrawing operations from a particular area, he should not
be forced to stay by a franchisee, when the former has no desire to do so.
However, the franchisor should be required to compensate the franchisee for
the loss suffered through the denial to renew. Thus, Manitoba should include a
renewal provision demanding six months notice of non renewal, as well as
allowing for non renewal when it is mutually agreed upon and when the
franchisor is withdrawing from the particular service area.
iii.Transfers
The franchisee will typically be restricted in its ability to transfer its rights and
obligations because the franchisor's grant of rights is based on factors that are
personal to the franchisee. The franchisee's ability to secure a mortgage or
encumber, transfer or assign its rights and obligations under the franchise
agreement will usually be subject to having obtained the franchisor's prior
consent. 126 The issue at hand concerns whether Manitoba should adopt
provisions regulating the transfer of a franchise by the franchisee to a transferee.
Introducing legislation may be useful to prevent franchisors from refusing
franchisees the ability to transfer the franchise by rejecting all possible
candidates. However, since terms of transfer are often included in franchise
agreements, the duty of fair dealing will require the franchisor to act in good
faith and in accordance with reasonable commercial standards when
considering the possibility of a transfer. Therefore, a franchisee will be protected
126
Zaid, supra note 67 at 19.