October 5, 2015 marked the start of Bill 38 known as Franchises Act and after a whirlwind of governmental support, it was enacted on November 17, 2015.
The bill started after an extensive investigation by the British Columbia Law Institute worked with various stakeholders to tighten up the regulations facing franchises and their disclosures.
Now that the Franchises Act has been enacted, the British Columbia government is in the process of firming up what regulations look like going forward. Although these new processes won’t go into effect until sometime in 2017, there are a few important details about disclosures that both franchisees and franchisors should be aware of.
The Application
The Franchises Act does not put regulations on the relationship between the franchisee and franchisor beyond monitoring whether or not the dealings between both parties is fair. This does not mean that the government will watch over disclosure agreements between both parties. Instead, it means that the government will provide actionable solutions for any franchisees who feel the franchisor has not adhered to their promises.
Simply put, franchising in British Columbia will continue to be self-governing for the most part, with governmental help available when needed. Here are a few of those incidents:
Mandatory Disclosure to Prospective Franchisees
Perhaps the biggest development to come out of the Franchises Act is the disclosure document requirements. Under the Franchises Act, franchisors must provide franchisees with a disclosure document. This document is meant to summarize all “material facts,” which includes information about the business, operations or capital. Financial information must also be included in this disclosure document.
The mandatory disclosure document must be received by the franchisee at least 14 days prior to the signing of the franchise agreement to give ample time for review.
This is quite similar to what’s already in place in most other provinces. One core difference is that instead of providing “strict compliance” with the disclosure document (such as in Ontario), British Columbia will require “substantial compliance.” This again shows that the franchising industry will remain largely self-governed even after this act goes into effect.
New Rights for Franchisees
Until now, common law has dealt with the concept of dealing in good faith. Now, the Franchises Act will solidify those good faith dealings with protections for the franchisees should there be a breach of contract. The courts have determined these good faith dealings to be centered around the performance and enforcement of the agreement. Franchisees are also getting the written right to associate. This means that several franchisees can associate with each other, without the franchisor standing in their way.
The Not-So-Big Changes Ahead
There aren’t many big changes coming with the Franchises Act, but there is enough of a change that franchisees should be aware of what’s ahead. One of the biggest takeaways are the mandatory disclosure documents that franchisors will be required to provide. The other is the new rights for the franchisees, including the right to good faith dealings and the right to associate with other franchisees.
Although the change are small, it is a good idea for franchisees to be aware of the new law and for franchisors to consult with legal counsel to ensure they are in compliance as the new laws come into effect.
Susan Payton is the President of Egg Marketing & Communications, a marketing firm specializing in content writing and social media management. She’s written three business books, including How to Get More Customers With Press Releases, and frequently blogs about small business and marketing on sites including Forbes, AllBusiness, The Marketing Eggspert Blog, and Tweak Your Biz. Follow her on Twitter @eggmarketing.