Underneath the Golden Boy - Robson Hall Faculty of Law

330 Underneath the Golden Boy
Thompson v. Cinnaroll Bakeries Ltd., 119 the Alberta Court of Queen’s Bench
held that, according to the franchise agreement, the franchisee was bound to
renew the contract unless significant changes had been made to the original
contract, such as an increase in royalty payments and loss of exclusivity in a
specific market.
The precedent established by renewal cases fails to adequately address the
renewal of franchise agreements. It fails to deal with situations where oral
promises to renew are not upheld as well as instances where the franchise
agreement does not mention the option of renewal, where franchise parties are
not bound to exercise good faith and fair dealing. It is clear that legislation is
necessary to complement the common law, forcing parties to exercise their best
business behaviour when dealing with each other upon renewal.
Having established that Manitoba is in need of renewal provisions, one
should consider how other jurisdictions with franchise legislation address the
matter. Since none of the Canadian provinces with franchise regulation include
renewal clauses, one must look abroad. The United States, having implemented
different renewal provisions in several of its states, provides the most complete
example.
California boasts the most extensive non-renewal clause, found in the
California Franchise Relations Act. Article 4, Section 20025 of the Act states
that no franchisor may fail to renew a franchise agreement unless he provides the
franchisee at least 180 days prior to written notice of its intention not to renew.
Furthermore, the franchisor must allow the franchisee during the 180-day period
to sell his business to a purchaser meeting the franchisor’s requirements for
granting a new franchise. A franchisor may refuse renewal where he withdraws
from distributing his products or services through franchises in the geographic
market served by the franchisee. 120 The following provisions, however, restrict
this section:
(1) Upon expiration of the franchise, the franchisor agrees not to seek to enforce any
covenant of the non-renewed franchisee not to compete with the franchisor or
franchisees of the franchisor; and
(2) The failure to renew is not for the purpose of converting the business conducted by
the franchisee pursuant to the franchise agreement to operation by employees or agents of
the franchisor for such franchisor’s own account; and
(3) Where the franchisor determines to sell, transfer or assign its interests in a marketing
premises occupied by a franchisee whose franchise agreement is not renewed pursuant to
this paragraph:
119
[2002] ABQB 1112.
120
Cal. Bus. & Prof. Code §20025