Underneath the Golden Boy - Robson Hall Faculty of Law

266 Underneath the Golden Boy
Brunswick Bill also provides broad authority for regulations to be made
respecting exemptions from any requirement or provision of the Act or
regulations. The Ontario and PEI Acts are more specific, authorizing regulations
to be made exempting certain franchisors from the requirement to include
financial statements in a disclosure document.
Alberta, Ontario, and PEI have made regulations to provide exemptions
from the requirement to include financial statements.
This financial disclosure is a very sensitive topic – most franchisors are wary to disclose
sensitive financial information in the form of financial statements required to be provided
as part of the disclosure document. To avoid disclosing the financial statements of their
operating companies, many franchisors incorporate sparsely detailed separate companies
solely to act as the “franchisor” in a franchise relationship. 144
The Alberta, Ontario, and PEI regulations exempt ‘mature’ franchisors,
which presumably have a solid business foundation, from the requirement to
include financial statements. In Alberta and Ontario, the exemptions apply if
the net worth of the franchisor is at least $5 million (or $1 million if controlled
by a corporation with a net worth of $5 million), it has at least 25 franchisees
operating for the preceding five years in Canada (or in Ontario, in another single
jurisdiction), and it has engaged in the franchise’s line of business continuously
for not less than the preceding five years. Ontario has added the requirement
that the franchisor, its associates, directors, general partners, or officers must not
have had a judgment against them in the preceding five years relating to fraud,
unfair or deceptive trade practices, or a law regulating franchises.
The PEI regulations set the same requirements as those in Ontario, except
that the $5 million net worth requirement has been lowered to $2 million. The
exemptions in all jurisdictions are made by self-assessment; an application to
government is not required. However, the PEI Act has an additional provision
allowing any franchisor to apply to the minister for an exemption from the
requirement to include financial statements in the disclosure document. The
minister may exempt the franchisor, subject to any terms and conditions, if
satisfied that to do so would not be prejudicial to the public interest.
J. Jurisdiction
All Acts provide that any provision in a franchise agreement that purports to
restrict the application of the law of the province or to restrict jurisdiction or
venue to a forum outside the province is void with respect to a claim otherwise
enforceable under the Act in the province.
144
Jones and So, supra note 3 at 34.