The Arthur Wishart Act articulates the franchisor's obligations upon receipt of a notice of recession, that is, within 60 days from the effective date of the recission, the franchisor is obliged to:
- refund the franchisee any money received from the franchisee other than money for inventory, supplies or equipment;
- purchase from the franchisee any inventory the franchisee purchased that the franchisee still has, at the franchisee's purchase price;
- purchase from the franchisee any supplies and equipment that the franchisee purchased, at the franchisee's purchase price; and
- compensate the franchisee for any losses that the franchisee incurred in acquiring, setting up and operating the franchise, less the amounts set out in a) to c) above.
The above costs could be significant for a franchisor to incur. As well, in the event that a franchisor receives a recission notice and disputes the recission, then legal fees and disbursements would be in addition to the fees above, and potentially fees associated with the arbitration process and an award to pay franchisee's legal fees. So although there is an exception to providing extending/renewing franchisees with a disclosure document, arguably it is good practice to provide the extending franchisee with a copy of the franchisor's current compliant disclosure document to avoid a subsequent recission claim as a result of the franchisor failing to deliver the extending/renewing franchisees with a disclosure document.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.