As judges have taken a technical and pro-franchisee approach to the interpretation of Canada's franchise legislation, most recent developments have not proven positive for franchisors, franchise lawyer Peter Dillon says in Corporate LiveWire's Franchise Law 2014 Virtual Round Table.
"This has resulted in fairly easy access by franchisees to the right to rescind the franchise agreement within two years of signing a franchise agreement, and thereafter to receive back all monies invested in the business," says Dillon, partner with Siskinds LLP.
In the online roundtable discussion, Dillon, along with seven other franchise law experts from around the world, discussed changes and developments in this area of law, frequent disputes in their jurisdictions and how to safeguard the image of the franchised brand.
The most frequent dispute arising in Canadian franchise law is the allegation by franchisees that the disclosure document delivered to them prior to purchasing their franchise was inadequate, Dillon writes.
"Faced with such an allegation, the franchisor and its counsel must carefully assess the quality and quantity of disclosure that was provided to the franchisee, and determine whether to negotiate a resolution, in the case of inadequate disclosure, or to stand their ground, in the case of what appears to be compliant disclosure."
One current trend in Canadian franchise law, Dillon tells Corporate LiveWire, is that as franchisee lawsuits and rescission claims have started piling up in the courts, franchisors have stepped up their compliance measures. Much greater care is being taken in the preparation of disclosure documents, he says, and the provision of those documents prior to the sale of a franchise.
But while oppression of franchisees is frequently touted as a basis for franchise legislation, in an ideal world, says Dillon, the management of franchising via laws and the judicial process needs to be balanced.
"Franchisees need to be held accountable for the deals they have made, and for their own business failings or lack of performance. Franchisors are not insurers and operating a franchised business is not without risk. Canada remains a wealthy, brand-conscious market. Franchising has the means to make a considerable contribution to the economy and should be supported whenever possible as a means to distribute goods and services," he says.
This article was originally posted on AdvocateDaily.com
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