đź•’ Estimated Reading Time: ~4 minutes
One of the most essential elements of buying a franchise is signing the Franchise Disclosure Documents (FDD). Every year, the Canadian FDDs are updated to reflect new legislation and expectations of franchisors and franchisees. These updates are critical to review so you can make the most informed about your future as a franchise owner.
Earlier this year, two new updates were announced that are even more important than past updates to understand for franchisors and franchisees alike. These legislative changes have shifted how each franchise must share the most relevant and recent financial statements to remain in compliance with the new laws.
While franchisors make updates, potential and future franchisees must know what to look for and what’s new with these laws. Here are the two most significant areas to remember as you research.
Disclaimer: We are not legal experts. Use the details below to stay informed, but always check with a lawyer to ensure you follow the marketing and employment laws correctly as you enter a new franchise.
Updated French Language Laws in Quebec
The first legislation to be aware of is the updated laws regarding French translations. In a Bill 96 amendment to the Charter of French Language in Quebec, updates were made to how French is used in “contracts of adhesion” or commercial contracts, like the FDD. In the most recent amendments, legislation will require franchisors to update how to display non-French trademarks on product packaging, signage, and other areas, which, as you’ll see below, could impact the FDD indirectly.
Because the FDD is a “contract of adhesion” between the franchisor and franchisee, the document and the specific commercial terms must be translated into French. This translation must be “equal quality” to the original contract, which means running it through a simple run-of-the-mill translation system online won’t be sufficient.
The reason why this law is fuzzy is because Quebec technically does not require an FDD. Still, it’s a common element to provide in the franchise negotiation phase, which can deem the FDD marketing or promotional, which would require that it be translated into French. Because of that fuzzy nature, many franchisors are either stopping the FDD delivery or investing in translating their FDDs into French.
Beyond the FDD, the franchisee may require that franchisors speak and negotiate with them directly in French. Again, this is a fuzzy area because a franchisee can waive the requirement and accept communications and services in another language.
A final consideration concerning this law is what happens after you’ve become a franchisee. Franchisors must update all signage and promotional materials for their Quebec locations by June 1, 2025. As the franchisee, you’re responsible for staying compliant with these new laws around the promotional items displayed. Reviewing the contract and FDD closely will ensure that the franchisor and franchisee use the best practices to remain compliant throughout the contract.
Canadian Federal Competition Act Revisions
Another new legislation recently enacted is a no-poach agreement law to stop franchisees from “poaching” or soliciting employees from each other’s businesses. This legislation was enacted in June 2023 to prohibit wage-fixing between two or more corporate entities owned by the same parent company. The phrase “each other” is key here. The agreements must be mutually agreed upon for franchises to be in violation. If the deal is one-sided, where only one franchise agrees not to poach another’s employees, it will not be an offence.
This differentiation gets messy when more than two parties get involved. Having multiple one-way agreements not to poach another’s employees could also trigger a liability. Having a separate one-way agreement by franchisees not to poach would not be an offence, but having separate agreements between franchisors who are unaffiliated with each other could be an offence. Reciprocal agreements between a franchisor and franchisee not to poach another employee is likely an offence and should be avoided at all costs.
Likewise, under this legislation, fixing, maintaining, or decreasing wages for unaffiliated employers is now a crime. For example, per diem, mileage reimbursements, non-monetary compensations, working hours, and other non-complete clauses could “affect a person’s decision to enter into or remain in an employment contract.”
There is undoubtedly a lot of fuzzy ground we cannot comment on from a legal perspective. To ensure you stay in compliance, having franchise agreements and employee contracts reviewed before entering into a new franchise is a good idea.
Kimberly Crossland is the founder of Roadpreneur and Cruisin' + Campfires, two companies designed to keep families together and living in freedom through travel and entrepreneurship. The goal of both businesses is to inspire meaningful change through the power of a strategic, thoughtful approach to life and business. In her free time, you can find her looking for a new adventure together with her two boys.