A franchise disclosure document is intended help franchisees make informed investment decisions about buying a franchise.
Prospective franchisees should be comforted by the legislation in Ontario, Alberta, New Brunswick, Prince Edward Island and Manitoba that recognizes the inherent imbalance of power in the franchisor-franchisee relationship, and tries to address that by giving franchisees certain rights.
But the legislation in those provinces is far from perfect. Ontario’s franchise statute is only 12 years old, and is already antiquated in the face of business realities, or so ambiguous in its language that franchise lawyers can have a field day interpreting its meaning, typically at the considerable expense of their entrepreneurial clients.
One of the complaints I hear most often from franchisors is that they are not permitted to require a franchisee to sign a non-disclosure agreement until at least 14 days after the franchisee received the disclosure document. Continue reading.