Underneath the Golden Boy - Robson Hall Faculty of Law

Response to Consultation Paper on Franchise Law 333
be forced to stay by a franchisee, when the former has no desire to do so.
However, the franchisor should be required to compensate the franchisee for the
loss suffered through the denial to renew. Thus, Manitoba should include a
renewal provision demanding six months notice of non-renewal, as well as
allowing for non-renewal when it is mutually agreed upon and when the
franchisor is withdrawing from the particular service area.
3. Transfers
The franchisee will typically be restricted in its ability to transfer its rights and
obligations because the franchisor’s grant of rights is based on factors that are
personal to the franchisee. The franchisee’s ability to secure a mortgage or
encumber, transfer or assign its rights and obligations under the franchise
agreement will usually be subject to having obtained the franchisor’s prior
consent. 126 The issue at hand concerns whether Manitoba should adopt transfers
provisions regulating the transfer of a franchise by the franchisee to a transferee.
Introducing legislation may be useful to prevent franchisors from refusing
franchisees the ability to transfer the franchise by rejecting all possible
candidates. However, since terms of transfer are often included in franchise
agreements, the duty of fair dealing will require the franchisor to act in good
faith and in accordance with reasonable commercial standards when considering
the possibility of a transfer. Therefore, a franchisee will be protected if the
franchisor unreasonably rejects all potential transferees. As such, there is no
reason to include a provision requiring that a franchisor not act capriciously in
assessing a transfer when the duty of fair dealing already imposes such a duty.
Although Iowa boasts an extensive transfer provision, detailing the process
in full, it lacks the extensive duty of good faith demanding such a duty in the
exercise of rights under the agreement. Thus, whereas Iowa needs transfer
provisions because of the limited duty of good faith, once it adopts the more
extensive duty, Manitoba will not.
Consequently, Manitoba should not adopt transfer provisions.
4. Sale of Franchise by Franchisee
The issue under this heading arises out of the following series of events.
Typically, if a franchisee sells his franchise and assigns that agreement and/or
sublease to the purchaser, the original franchisee remains liable for all obligations
contained in the agreements. This is a typical provision of commercial leases.
However, some agreements contain further obligations by providing that if the
purchaser subsequently renews the agreements for another term, the original
126
Frank Zaid, supra note 65 at 19.