Underneath the Golden Boy - Robson Hall Faculty of Law

Franchise Law Consultation Paper 2007 289
legislation already goes too far, and that Canada should have adopted the
UNIDROIT ‘less is more’ approach to franchise regulation:
Because of the strong presence of lawyers with extensive experience on behalf of
franchisors operating internationally, the frequent and well-intentioned efforts to inject
more and more protections on behalf of the franchisee were tempered by the larger
consideration that in the final analysis legislators could end up protecting the franchisees
right out of a livelihood by introducing overly burdensome laws. Even worse, legislation
might protect the economy right out of the jobs and wealth that franchising produces.
Although the debate among franchisor and franchisee counsel and lobbyists continues
about the legitimacy of the claim, Alberta’s 1971 act and Iowa’s present relationship law
are cited as examples of the macroeconomic harm that over-burdensome regulation
produces. In business, fear – no matter how irrational – is a deterrent. 227
4. Franchise Regulatory Body
In Ontario, it has been suggested that new legislation is needed to create a
franchising regulatory body. The regulator’s functions might include reviewing
the quality of disclosure given to franchisees, providing a less expensive system
for resolving disputes in comparison to litigation, and imposing penalties for
contraventions of franchise legislation and regulations. 228 The regulatory concept
could also require some franchisors to post a bond, so that franchisees who suffer
damage will be compensated. 229
It is argued that the existing Canadian legislation does not provide adequate
protection for franchisees:
Some franchisors are not giving adequate disclosure, and franchisees who have already
invested a life’s savings at the age of 40 or 50 are having to spend $50,000 to $100,000 to
enforce their rights under franchise law to rescind their contracts and recover payments…
“When a franchisee files a notice of rescission, the franchisor says: ‘Sue me’…If the
franchisor is bad enough not to give you a disclosure document to begin with, most likely
he will not refund the money…People should not be forced to locate a franchise lawyer
and litigate this, but should have the benefit of a regulatory body, given that franchising
plays such an important role in our economy and more and more people are choosing to
buy a franchise instead of set up their own business”. 230
The concept of a governing body with the power to impose substantial
penalties, including cease trade orders, had been supported by franchisee
227
P.M. Dillon, “Will Franchising Survive As a Business Model Under Canadian laws and
Regulations” supra note 7: the author served as the Canadian consultant on the project (at
note 5).
228
J. Daw, “Government regulator could help both sides in a franchise: Province awaiting report
from committee” Toronto Star (March 16, 2006).
229
Ibid.
230
Ibid. quoting B. Hanuka, Chair, Ontario Bar Association Joint Subcommittee on Franchising.