UTGB Vol 5.pdf - Robson Hall Faculty of Law

90 Underneath the Golden Boy
The primary shortcoming of the CPA's Code of Ethics and Disclosure
Requirements is that it is only binding on members of the CFA. This means
that a franchisee will only be protected if the franchisor is a member of the
Association. Furthermore, whereas Ontario and Alberta have introduced
penalties for breach of their respective Acts, the CFA can only revoke a non..
compliant member's membership from the Association. This is hardly a
sufficient deterrent to an unscrupulous franchisor, who is likely not going to
register with the Association to begin with. 31 As stated in the Uniform Law
Conference of Canada's "Status Report on National Franchise Law Project," in
2002:
Voluntary codes by trade associations have inherent drawbacks in that they are not
subject to governmental or statutory delegation of authority. Therefore, the most
common remedy available to an industry association is expulsion of a non-compliant
member ... non members of the association are unaffected by the policies or codes of
conduct of the association in question. 32
Regardless of this drawback, it is important to note that the existence of the
CPA's Code of Ethics and Disclosure Requirements mearu that there are
already several franchisors who are abiding by disclosure rules and having to
provide disclosure documents to potential franchisees in Manitoba. These
include such large companies as A&W Food Services of Canada Inc., Orange
Julius of Canada Ltd., Boston Pizza International Inc., Canadian Tire
Corporation Limited, Pizza Hut, Play it Again Sports, Second Cup Ltd., and
Dairy Queen Canada, to name a few. 33
The CFA recognizes and supports the requirement of disclosure and ethical
behavior in franchise relationships. This is evident in the fact that the
Association requires all of its members to abide by its rules and regulations
where no such laws are already in existence. This is more proof that franchise
legislation is necessary in Manitoba.
E. Securities Regulation
Discussing the need for franchise legislation that mandates disclosure invariably
necessitates a contrast with securities regulation. This is primarily because in
several instances, franchise agreements can be analogous to securities.
Currently, the question of whether a franchise agreement is a security must be
addressed on a case.-by.-case basis, with the amount of control the franchisee has
31
Zaid & Sotos, supra note 24 at 25.
32
Ibid.
33
For a full list of CFA members, please refer to the CPA's official webpage under the
heading "Canadian Franchise Association Members/' online: Search Franchise
Opportunities .