As franchising continues to penetrate new markets, the time has never been better to explore international expansion into Canada. With nearly half of all new retail businesses in Canada being franchised businesses, Canada has established itself as a leader in the franchising industry.
Whether franchisors are considering expanding into Canada for the first time, or are seasoned international franchisors, there is much to learn about successful franchising in Canada, including a variety of business and legal issues relating to: cultural challenges; disclosure compliance; anti-trust laws; and intellectual property protection, to name but a few.
Canada is a confederation made up of ten provinces and three territories. Franchisors operating in Canada are subject to both federal and provincial law, which may vary from province to province. The province with the most notable differences is Quebec. Quebec is predominantly French-speaking, and while the majority of Canada is governed by the common law, all contractual relationships in Quebec are governed by its Civil Code. In addition, all public signage, posters and commercial advertising must be either solely in French or in French and another language with the French wording being markedly predominant. In addition, all employees in Quebec have the right to carry on their activities in French.
Thus, a franchisor intending to operate in Quebec must take the necessary steps to adapt its system so that it can be successful in a unique legal, linguistic, and cultural environment.
Currently only two provinces in Canada, Alberta and Ontario, require a franchisor to deliver a prescribed form of disclosure document to a prospective franchisee before it can execute a franchise agreement.
The disclosure documents do not have to be registered with a regulatory body, and the franchisors enjoy substantial freedom in structuring their contractual agreements and selling their franchises.
However, it should be pointed out that many business practices customary in franchising are subject to regulation by both federal and provincial laws of general application. The remainder of this article will touch on some of the more significant issues that impact generally on franchising.