On November 14, 2017, Ontario’s legislature passed new laws regarding franchise ownership. This new legislation, known as the CURT Act, contains minor changes that could have a meaningful impact on the process of buying a franchise in 2018. Here’s what you need to know.
What is the CURT Act?
CURT stands for The Cutting Unnecessary Red Tape Act. Although it’s not specific to franchises, it directly impacts Ontario’s franchise legislation by amending several important acts including the Arthur Wishart Act (Franchise Disclosure) and the Wishart Act. Some of these changes are still in limbo while the Ontario government enacts them, but it’s expected that they’ll take effect soon. When they do, here’s what you can expect.
Changing Terminology
Several terms are getting a makeover or getting banished all together.
- “Service mark” has been removed because it does not have legal significance in Canada.
- The term “franchise” has changed so that the franchisor themselves can become a licensee instead of an owner of the intellectual property of the franchise.
- A “single license exemption” must be granted specifically for Canada for the license to be triggered, which is new.
- The term “franchise” has also changed to provide that the right to exercise control is sufficient for characterizing a business as a franchise.
The first changes are minor housekeeping changes. The last point is important because it’ll mean a likely increase in the number of businesses that fall under the new legislation.
Confidentiality Agreements
In the past, when a franchisor entered into discussions with a potential franchisee, they triggered certain disclosure obligations. This has changed and now franchisors and franchisees can use non-disclosure agreements to allow the franchisor to release proprietary information without concerns that the information will be unprotected. This new legislation is a good thing because it means potential franchisees will be able to get more information that in the past was withheld by franchisors.
Disclosure Documents Aren’t Needed to Make a Deposit
Franchisors arnow able to accept refundable deposits without requiring a disclosure document. It’s still unclear what the maximum amount for this deposit is for Ontario, but B.C.’s new franchise legislation says the disclosure obligation doesn’t take effect until over 20% of the initial franchise fee is paid.
Putting These Changes in Motion
Many of these changes have not been put in motion yet. At the time of writing this article, a date has not been set yet for when these changes will take place. As soon as more changes develop in Ontario’s franchise law, we’ll post more information.
Susan Guillory 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.