Underneath the Golden Boy - Robson Hall Faculty of Law

320 Underneath the Golden Boy
would not prejudice the public interest. 83 In order to better understand the
financial document disclosure exemption, it is necessary to consider the actual
provisions.
Section 11 of the Regulations Made Under the Arthur Wishart Act
(Franchise Disclosure), 2000, 84 contains the tripartite test for the financial
exemption. It is important to note that this is a self-declaratory process, and the
onus to satisfy the tests rests on the applicant. A franchisor must thus establish
that: (1) the franchisor has a net worth on a consolidated basis based on its most
recent audited or review engagement financial statement of not less than $5
million or $1 million if it is controlled by a corporation that has a net worth of
not less than $5 million; (2) the franchisor has had at least 25 franchisees
operating in Canada or in a single country other than Canada during the five
year period prior to the disclosure document, or it is controlled by a corporation
that satisfies this requirement; and (3) the franchisor, its associates, officers,
directors, or general partners have not had any judgment, order or award made
in Canada against them relating to fraud, unfair or deceptive business practices,
or a law regulating franchises, including the Arthur Wishart Act (Franchise
Disclosure), 2000 in the five years prior to the date of the disclosure document. 85
In contrast, Alberta has incorporated a two-pronged test that does not
contain the third step from Ontario’s regulations. According to section 1 of the
Franchises Act Exemption Regulation, 86 a franchisor will not be required to
include financial statements in a disclosure document given to a prospective
franchisee if:
(a) the franchisor has a net worth on a consolidated basis according to its most recent
financial statements, which have been audited or for which a review engagement report
has been prepared, of not less than $5 million or of not less than $1 million of the
franchisor is controlled by a corporation that has a net worth of no less than $5 million;
and
(b) the franchisor has had at least 25 franchisees conducting business at all times in
Canada during the 5-year period immediately preceding the date of the disclosure
document, has conducted business that is the subject of the franchise continuously for no
less than 5 years immediately preceding the date of the disclosure document, or is
controlled by a corporation that meet the two previous requirements.
It may be argued that Alberta has not included the third requirement from
Ontario’s test in an attempt to restrict it to purely financial matters. In other
words, as the fact that a franchisor, its associates, officers, directors or general
83
Frank Zaid, supra note 65 at 34-35.
84
O. Reg. 581/00.
85
Daniel F. So, supra note 69 at 112.
86
Alta. Reg. 312/2000, s. 1.