Before entering into a franchise agreement, both franchisees and franchisors should carefully consider the terms governing the duration of their relationship as well as the circumstances which could lead to the termination of the agreement. Often, franchise agreements will automatically renew after a set period of time, so long as certain conditions are met. In those instances, if neither party breaches the agreement, and if there is no limit placed on the number of renewal terms granted by the franchise agreement, the relationship may continue indefinitely.

What Is an “Evergreen” Clause in a Franchise Agreement?

This brings us to a discussion of indefinite term contracts containing what are commonly referred to as “evergreen” clauses. An indefinite term contract is an agreement that does not have an “expiry date”. An “evergreen” clause entails the automatic renewal of the agreement year after year. What does this mean in practice? Well, in most cases, if both parties are acting in accordance with the terms of the agreement, the relationship may continue indefinitely. However, what if one party wants out in circumstances where there have been no events of default entitling the innocent party to terminate the agreement?

Can an Indefinite Franchise Agreement Be Terminated on Reasonable Notice?

In some instances, indefinite term contracts may be terminated on reasonable notice in the absence of any clause permitting such right. Courts have been willing, in some cases, to find an implied term which permits the termination of a contract without cause. The Ontario Court of Appeal has stated that when the term of a contract is not fixed and there is no provision for the termination of the contract on reasonable notice, a court may treat a contract as either perpetual in nature or as an indefinite term contract with an implied unilateral termination right on reasonable notice.[1] In the latter instance, either party to the agreement can terminate the contract if they give the other party reasonable notice. How the court determines what is ‘reasonable’ is largely dependent on the facts of each particular situation. In order to make this determination, the court must consider the following:

1. the relationship between the parties;
2. the specific terms of the contract; and
3. all surrounding circumstances.

Type of Relationship: Some types of contracts which depend upon mutual trust between the parties, like contracts of employment, partnership, or personal services, naturally give rise to an implied right to terminate upon reasonable notice.[2] Franchise agreements have also generally been found to be of a class of agreements that can be terminated upon reasonable notice without cause.[3] This is because franchise agreements are the type of contract that involve mutual trust, and each party should have the right to terminate the contract unilaterally on notice in the event there is a breakdown of that trust. In other words, trust between the parties is so important in this type of relationship that the absence of it is sufficient grounds for either party to end the contract.

Specific Terms: There may be specific terms within the franchise agreement which either point towards or away from an implied right to terminate without cause on reasonable notice. For example, if an agreement stipulates that it can only be terminated by mutual agreement or for a material breach of contract, then likely only in those two circumstances mentioned could the parties actually terminate the agreement. The courts in Ontario have also found that, given that franchise agreements are contracts of adhesion reflecting unequal bargaining power, they require the utmost good faith in their performance and the courts must carefully scrutinize their termination. In order to be appliable, a termination clause must be very clear, and its words will be read strictly.[4] When an agreement contains specific terms which set out when termination may occur, it is more difficult to establish an implied right to terminate on reasonable notice without cause. In the context of an agreement with numerous termination provisions, an additional implied right to terminate would arguably be inconsistent with the intention of the parties.

In addition to the existence and content of any termination provisions in the agreement, in order to determine whether or not a contract is perpetual in nature or an indefinite term contract capable of being terminated on reasonable notice, the existence in the contract of the express intention to be bound perpetually can provide a strong basis for a finding that the contract is actually perpetual.[5]

Where there are no specific terms governing the termination of a contract, then the courts have been much more likely to imply the right to terminate that contract on reasonable notice, especially in regard to contracts of a commercial character.[6]

Surrounding Circumstances: In addition to the nature of the relationship and specific terms in the contract, the surrounding circumstances help determine whether there is an implied right to terminate on reasonable notice. These factors include:

• the level of sophistication of the parties;
• whether the parties were strangers at the time they entered into the agreement;
• whether the parties had done prior business together;
• whether the relationship involved the need for trust, confidence, and satisfaction; and
• the amounts invested by each party pursuant to the agreement.

When Will a Court Find an Agreement to Be Perpetual?

The discussion above focuses mostly on circumstances in which a court may find an agreement to be terminable on reasonable notice, but this is only one possible outcome. A court may instead conclude that the agreement is perpetual. The Ontario Court of Appeal has confirmed that in fact, there is no presumption in favour of treating an indefinite term contract as terminable instead of perpetual. Rather, each situation is context-specific and depends on how the contract was constructed.^[7] In Conseil Scolaire Catholique Franco-Nord v Nipissing Ouest (Municipalité), the Ontario Court of Appeal considered whether an indefinite service agreement was perpetual or could be terminated on reasonable notice. The Court applied the three factors discussed above – the type of relationship, the specific terms of the contract, and the surrounding circumstances – and concluded that the agreement was perpetual. In reaching that conclusion, the Court noted that the agreement was not a strictly commercial arrangement and that the relationship did not depend on the type of mutual trust that might otherwise give rise to an implied right to terminate on reasonable notice.^[8]

What does all this mean in practice? Although courts may imply a right to terminate an agreement on reasonable notice in certain circumstances, they will also enforce perpetual obligations where the parties have clearly agreed to them, or where the nature of the relationship, the specific terms, and the surrounding circumstances indicate that the parties intended a perpetual agreement. While commercial agreements, including franchise agreements, may be more likely to be found terminable on reasonable notice, parties should still carefully consider these issues when drafting their agreements and clearly express their intentions regarding the duration and termination of the relationship.

What Have Canadian Courts Said About Perpetual Franchise Agreements?

The courts have considered the question of whether a termination clause could be implied into a franchise agreement with a purportedly “perpetual” term a few times, with varying results.

France v. Kumon

In France v. Kumon, 2014 ONSC 5890, the Ontario Superior Court of Justice considered whether an oral franchise agreement could be terminated upon reasonable notice. In this case, a franchisor purported to terminate a verbal franchise agreement when, after protracted negotiations and an 11-year hiatus, a franchisee refused to sign the franchisor’s new form of written franchise agreement. The franchisee argued that the franchisor had no right to terminate the franchise agreement because it was a perpetual contract. The Court held that where a franchise agreement does not contain a termination clause, a court has two options: (1) to imply a right of termination; or (2) to treat the agreement as perpetual. In this case, the Court found that there was no evidence that a perpetual contract was the parties’ intention, for a few reasons: (i) the franchisor, in all versions of its written franchise agreement, did not wish to have perpetual contracts with its franchisees; and (ii) the franchisee’s objections to the new written franchise agreement did not have anything to do with the length of its term or renewal provisions and so the court concluded that the franchisee was not concerned with the perpetuity of the agreement. Given that the verbal franchise agreement was not a perpetual contract, the Court held that it could be terminated on reasonable notice.

Petro-Lon Canada Ltd. v. Petrolon Distribution Inc.

Alternatively, in Petro-Lon Canada Ltd. v. Petrolon Distribution Inc., 1995 CanLII 7407, an arbitrator refused to imply a right to terminate on reasonable notice into a franchise agreement. The franchise agreement in this case was a written agreement which contained a defined initial term, and an unlimited number of automatic renewals thereafter (unless the franchisee provided notice that it did not want to renew). There were also termination provisions written into the franchise agreement which indicated that: (i) either party could terminate the agreement on notice if there was a material breach; (ii) the franchisee could terminate the franchise agreement without cause to the exclusion of the franchisor; and (iii) the franchisor could terminate the franchise agreement with cause. The franchisor tried to terminate the franchise agreement without cause by providing the franchisee with 11.5 months notice of its termination. The arbitrator held that given that: (i) the franchisee had made a substantial investment into the business in terms of money and time; (ii) the contract could be terminated for cause; (iii) the contract could be terminated by the franchisee on notice without cause; and (iv) the contract contained performance requirements only for the first year, no clause permitting termination on reasonable notice should be implied in favour of the franchisor. The arbitrator’s decision was upheld by the court on appeal.

What Should Franchisors and Franchisees Consider Before Signing?

What appears to be a long-term, endless relationship may not be forever. Both franchisors and franchisees should keep in mind that, although it is possible for a franchise agreement to be perpetual, the courts will only uphold such an agreement in certain circumstances.

Before moving forward with a franchise agreement, think about the kind of relationship you want to have with your franchisee or your franchisor. Are you prepared to offer your franchisees automatic renewals year after year? Are you prepared to enter into an agreement that allows your franchisor to terminate you without any cause on 60 days’ notice? What will happen to the franchisee’s investment if the agreement is terminated? No one expects a relationship to end on unhappy terms, but it happens, and it is better to contemplate termination scenarios at the beginning of the relationship, rather than at the end. In order to avoid any uncertainty and a potential battle in court, both franchisees and franchisors should be sure that their intention as to the length of the term and any renewal terms is very clearly expressed in the franchise agreement, that the franchise agreement contains express provisions as to how and when it may be terminated and that it may only be terminated in accordance with those express provisions, and that they both understand the circumstances under which each of them can terminate the relationship.

About the author

John Yiokaris

John Yiokaris is a partner at Sotos LLP, a full-service law firm based in Toronto.  He has been recognized by Chambers Canada, LEXPERT, Who’s Who Legal, Lexology, and Best Lawyers Canada as a leading Canadian franchise law practitioner.

John practices business law with a specific focus on franchising and disputes and he is trusted counsel to both franchisors and franchisees.  If you are negotiating, renewing or considering the termination of a franchise agreement, contact John to discuss the agreement and your options. He can be reached directly at 416.977.3998 or jyiokaris@sotos.ca.

The post “Perpetual” Franchise Agreements: When Can They Be Terminated? appeared first on Sotos LLP.

Since the opening salvo in the U.S.-Canada trade dispute in early 2025, the measures initially imposed on Canadian goods have been modified by exemptions for CUSMA-compliant goods and supplemented by sector-specific tariffs, including on steel, aluminum and automobiles. In February 2026, the U.S. Supreme Court held that the International Emergency Economic Powers Act did not authorize the broad tariffs imposed under that statute. That decision did not, however, bring the trade dispute to an end, as the U.S. has continued to rely on other statutory authorities to impose tariffs on certain Canadian goods.

Canada’s response has evolved as well. After imposing counter-tariffs beginning in March 2025, Canada removed most of those initial countermeasures effective September 1, 2025, while retaining measures affecting steel, aluminum and automobiles. The dispute has remained fluid, with further U.S. measures and Canadian countermeasures announced as recently as August 2026. The takeaway for businesses is that the tariff rates and products affected at any particular point in time should not be assumed to remain static.

The continuing use of U.S. tariffs and Canadian counter-tariffs has had widespread effects across various industries, including the franchise sector. Franchisors and franchisees must continue to prepare for the legal and business consequences of rising costs, disrupted supply chains and shifting market dynamics. The experience since March 2025 has also shown that tariff planning needs to account for changing rates, exemptions, product coverage and legal authorities.

SUPPLY-CHAIN ANALYSIS

Franchisees that depend on imported goods — whether for equipment, supplies, or inventory — may face substantial cost increases due to tariffs. For instance, tariffs on raw materials, such as steel and aluminum, as well as finished products, will likely drive up operational expenses and delay deliveries, potentially disrupting the system’s supply chain. This will impose increased costs on franchisees, which will necessitate a difficult decision between absorbing such costs, passing them on to customers, or a combination of both. Many franchise agreements also require the use of specific materials and equipment to maintain consistency throughout the system, which may limit (absent franchisor intervention) the ability of franchisees to easily adapt to changing economic circumstances.

Maintaining a strong franchisor-franchisee relationship is key in navigating these changing market conditions. Below are certain key considerations for franchisors in navigating this relationship:

Initial investment: Franchisors must consider whether they should make changes to their initial investment expectations and requirements for franchisees. If tariffs increase the cost of equipment, supplies, or inventory, franchisors should consider reviewing and revising the initial investment estimates to reflect these higher costs. Failure to do so may mislead potential franchisees about their expected expenses. Moreover, failing to account for such changes may be setting franchisees up for failure before they even begin operating.

Ongoing expenses and unit economics: Franchisors should evaluate how tariff-induced cost increases affect their unit economics, including per-location profitability, break-even points, and overall financial sustainability. Clearly presenting this data can help franchisees make informed investment decisions. If tariffs impact ongoing costs, such as supply procurement or vendor agreements, these changes should be disclosed. Franchisees should be made aware of potential cost fluctuations. Franchisors should assess franchisee costs on a market-by-market basis, and prepare to be flexible on procurement where necessary to ensure that franchisees’ unit level economics remain viable in light of this volatility.

Supply chain and sourcing restrictions: If a franchise system mandates specific suppliers affected by tariffs, these restrictions should be transparently disclosed. Franchisors may also explore whether allowing some flexibility in supplier selection can help mitigate disputes, and actively work with franchisees to assess whether domestic alternatives exist that will (while perhaps not entirely consistent with brand standards applicable in the U.S.) allow the franchisee to continue operating without further hardship than is necessary.

Financial performance representations: Franchisors should monitor profit margins and other financial metrics due to tariff-related cost increases and assess whether tariff-related cost increases are a development that impacts financial performance representations. Providing outdated or overly optimistic projections could expose franchisors to legal claims and otherwise adversely impact the franchisor-franchisee relationship.

CONSUMER PRICE SENSITIVITY

Franchisors should also consider whether to authorize or encourage price increases for goods and services. However, price-sensitive consumers may reduce their spending or seek alternatives, particularly in highly competitive industries such as quick-service restaurants, retail, and hospitality. It is critical that franchisors consider balancing necessary price adjustments with consumer expectations in order to maintain brand reputation and profitability. In light of these challenges, franchisors should consider which obligations currently imposed on franchisees are crucial to maintaining brand standards, and which others may be more flexible.

ADAPTION IS KEY

Predictable costs and strong unit economics are the hallmarks of a successful franchise system. While tariffs may create new cost pressures, they also present opportunities for Canadian brands to emphasize domestic production and sourcing, which can resonate with consumers and differentiate them in the market. Similarly, U.S. brands entering Canada may still find opportunities to expand, particularly when the favourable exchange rate helps offset tariff impacts, allowing cost-competitive pricing in the Canadian market. Franchisors and businesses that adapt their supply chains, pricing strategies, and brand positioning to these evolving dynamics can still find opportunities for growth and expansion despite the shifting trade landscape.

OPPORTUNITIES & SHIFTS

While tariffs impose significant challenges for businesses of all stripes, they also provide opportunities to savvy and opportunistic businesses. For example, Canadian franchise systems with predominantly domestic supply chains may reap the benefits of changing consumer preferences towards Canadian-made products, while products previously bound for the U.S. may be sold domestically at the same or lower prices. Franchisors can also re-evaluate global sourcing strategies to mitigate tariff exposure.

To address ongoing challenges, franchisors should consider the following actions:

• Supply-chain diversification: The impending tariffs should prompt franchisors to carefully re-evaluate suppliers and explore domestic alternatives where feasible.
• Negotiating terms: Franchisors and franchisees should also work with suppliers to share or reduce tariff-related cost burdens.
• Efficiency measures: Franchisors and franchisees should invest in technology or streamline operations to offset increased expenses.
• Franchise disclosure and agreement revisions: It is critical that franchisors assess whether franchise disclosure documents and franchise agreements need adjustments to address unforeseen consequences arising from the tariffs.

MADE IN CANADA

While not the primary focus of this article, businesses should keep in mind that promoting products as “Made in Canada” or “Product of Canada,” or highlighting Canadian ownership, can be a valuable strategy for brands seeking to reduce the impact of tariffs between Canada and the U.S. However, businesses must ensure that such claims comply with Canadian law, including the Competition Act, the Consumer Packaging and Labelling Act, and the Textile Labelling Act. These acts prohibit false or misleading representations, and restrict how and when such claims can be used. Businesses that choose to make “Made in Canada” or “Product of Canada” claims must ensure their claims meet the appropriate guidelines and thresholds.

LESSONS LEARNED IN THE FIRST EIGHTEEN MONTHS OF THE DISPUTE

The first eighteen months of the dispute have reinforced that managing tariff risk involves more than deciding whether to absorb an additional cost or pass it along. Tariffs have been introduced, modified, exempted and challenged, sometimes in relatively short order. For franchise systems, a few practical lessons have emerged:

Build flexibility into the supply chain: Domestic sourcing can help reduce exposure, but flexibility may be even more important. Having alternative approved suppliers, products or specifications can give a franchise system more room to respond when tariffs change. It is also important to understand where key inputs actually originate and how they are classified for tariff purposes. Buying from a Canadian supplier, for example, does not necessarily mean that the underlying goods are of Canadian-origin or insulated from tariffs.

Understand who bears the tariff risk: Supplier, distribution and franchise arrangements should make clear who ultimately bears tariff-related cost increases. Just as importantly, the parties should understand what happens if a tariff is later reduced, removed or refunded. The successful legal challenges to certain U.S. tariffs have shown that tariff costs may not always be permanent. This makes provisions dealing with tariff pass-throughs, refunds, rebates and changes in law worth another look.

Disclose volatility rather than try to predict it: The pace of change over the past eighteen months has also demonstrated how difficult it is to predict where tariffs will be months—or even weeks—into the future. Rather than trying to forecast a particular outcome, franchisors should ensure that their disclosure appropriately addresses material exposure to tariffs and other trade measures, particularly where those risks could affect initial investment estimates or financial information.

Look for available relief: Tariffs do not always have to be treated simply as an unavoidable cost of doing business. Government remission, financing and other tariff-relief programs may be available in appropriate circumstances. Where a franchise system has centralized purchasing arrangements, it is worth considering whether the franchisor, supplier, distributor or franchisee is best positioned to pursue that relief before the additional cost is passed through the system.

Plan for more than one outcome: Perhaps the clearest lesson is that tariff planning should not depend on a single prediction about the future of Canada-U.S. trade. Measures have been imposed, modified, exempted, challenged and replaced over a relatively short period. Franchise systems will be better positioned if they test their supply chains and unit economics against a range of tariff, sourcing and pricing scenarios and leave themselves enough flexibility to respond when circumstances change.

How Sotos Can Help

Tariffs can affect much more than the cost of imported goods. For franchise systems, they can also create issues around supplier arrangements, pricing, franchise disclosure, franchise agreements and the allocation of increased costs between the parties.

Sotos LLP advises franchisors and other businesses on the legal and commercial issues that can arise when market conditions change. Our work can include reviewing franchise agreements and disclosure documents, assessing supplier and distribution arrangements, reviewing how tariff-related costs are allocated, and advising on sourcing and pricing issues.

We can also assist businesses with advertising and marketing issues, including the use of “Made in Canada” and “Product of Canada” claims.

If tariffs or other trade measures are affecting your franchise system or commercial arrangements, please contact Jason Brisebois at 416.572.7323 or jbrisebois@sotos.ca, Peter Viitre at 416.977.7754 or pviitre@sotos.ca, or Nicole Perez at 416.977.3674 or nperez@sotos.ca.

About the Authors

Jason Brisebois is a partner at Sotos LLP whose practice includes franchise law, mergers and acquisitions, commercial leasing, privacy and data protection, and advertising and marketing law. He also advises clients on commercial agreements and Canada-U.S. cross-border business matters.

Peter Viitre is a partner at Sotos LLP whose practice focuses on franchise law. He advises franchise systems on franchise agreements, disclosure obligations and other legal and commercial issues affecting their businesses.

Nicole Perez is an associate at Sotos LLP who advises clients on franchise and commercial matters, including legal issues affecting franchisors and businesses operating within franchise systems.

The post TARIFF TURMOIL: U.S. tariffs and Canadian counter tariffs will have an impact on the franchise industry appeared first on Sotos LLP.

There are a variety of programs and grants offered by the federal and provincial governments that provide funding to subsidize the costs of trademark searches, analysis and filings. We have included information on three such programs below.

What government funding is available for trademark and IP protection in Canada?

What is Intellectual Property Ontario (“IPON”)?

The IPON program offers IP support to enterprises at various stages of growth. They provide clients with access to expert IP advice, services, and resources to better understand how to:

• maximize the value of IP;
• strengthen business capacity to grow;
• compete in the global market; and
• enhance research and commercialization outcomes.

The IPON program provides a variety of services: IP funding, IP benchmarking, IP education, IP coaching, and IP insurance.

IP Funding

IPON clients are eligible for funding to support IP protection and commercialization, with IPON covering up to 80% of expenses based on an approved scope of work. Clients are required to contribute at least 20% of the service costs and provide a plan to ensure future IP sustainability. Funding may be applied to IP-related agreements (such as non-disclosure agreements, licences) or contracts with high IP impact (master service agreements or partnership agreements). Certain expenses, such as administrative costs, litigation costs, taxes and subscriptions are not eligible for funding. IPON also does not cover costs for past work. Additionally, all IPON-funded services must be delivered by licensed IP lawyers or registered IP agents in Ontario. Clients may use their own providers or choose from IPON’s approved list of IP service providers.

IPON Benchmark

IPON offers a benchmarking tool that provides a comprehensive assessment of clients’ IP awareness by conducting a review of their IP strategy, assets and processes. These results help to tailor IP strategies and actions.

IP Education

Clients are able to participate in online workshops where IP experts facilitate class discussion and provide practical guidance. Clients are also provided with module-based e-learning courses on topics tailored to advance clients’ IP knowledge. A micro-credential is awarded to clients to showcase their learning milestones.

IP Coaching

IPON clients will have access to one-on-one coaching from IP coaches at no additional cost. These sessions will be tailored to clients’ specific needs and assist clients in developing and strengthening their IP position.

IP Events

IPON clients will have access to exclusive events geared towards networking, education, and growth. Events include keynote speeches, panels, and workshops delivered in collaboration with IPON experts.

IP Insurance

IPON clients that are eligible for funding will also receive IP insurance with a base coverage of $1 million. This insurance applies collectively to defense costs and enforcement actions.

Who is eligible for IPIN funding?

IPON’s Eligibility Criteria consist of a number of requirements.  Specifically, applicants must:

1. Be an Ontario-based small or medium sized enterprise (i.e. with fewer than 500 employees);
2. Be managed by a team that includes one or more Canadians;
3. Have a physical address in Ontario for substantive operations;
4. Operate in Ontario and intend to grow their business in Ontario long term;
5. Own IP or IP rights that it intends to commercialize or monetize in Ontario;
6. Operate in one of the following sectors:
   • health technology;
   • life sciences;
   • artificial intelligence;
   • vehicle technology;
   • mining technology;
   • agriculture;
   • food technology;
   • cleantech; and
   • advanced manufacturing (if the technology relates to any of the aforementioned sectors);
7. Demonstrate potential to realize societal or economic benefit to Ontario;
8. Demonstrate financial capacity to advance the protection and commercialization of IP and IP rights that may be supported by IPON Client Services;
9. Have an immediate IP need suited for IPON services and IP funding; and
10. Be a Canadian-controlled entity:
    • Private for-profit entity whose majority of the direct and indirect beneficial ownership is under the control of individual(s) resident of Canada and incorporated under the laws of Canada or any of its provinces or territories with a head office located in Canada; or
    • Public for-profit entity where over 20% of the direct and indirect ownership is under the control of individual(s) who are residents of Canada.

What is ElevateIP at Communitech?

ElevateIP is a federally-funded project designed to provide assistance to Canadian startups with regard to the development and protection of their intellectual property. The program is delivered through Communitech and Invest Ottawa in Ontario.

Who qualifies for ElevateIP funding?

ElevateIP’s Eligibility Criteria consists of certain requirements. Applicants must:

1. Be a Canadian-Controlled Private Corporation (“CCPC”);
2. Have fewer than 500 full time employees, globally;
3. Have exclusive rights to the IP; and
4. Be headquartered in Ontario, Manitoba or Saskatchewan.

Applicants may be required to submit additional information and attend an assessment meeting with an IP advisor to finalize the application process.

What is CanExport SMEs?

The CanExport SMEs program aims to support Canadian companies that produce goods and services or play a key role in exporting Canadian products to other international markets. The program funds projects that have the potential to significantly boost Canada’s economic growth and offers up to $50,000 to Canadian small and medium sized enterprises (“SMEs”) for international business development activities including expenses related to the protection of IP in target markets.

Who qualifies for CanExport SMEs?

To be eligible, your company must satisfy the following criteria:

1. Be for-profit;
2. Be an incorporated legal entity, limited liability partnership or cooperative in Canada;
3. Have an active Canada Revenue Agency business number;
4. Have between 3 and 500 full-time equivalent employees; and
5. Have between $300,000 and $100 million in annual revenue declared in Canada during its last complete tax reporting year (or during the last 12 months for monthly and quarterly filers).

Funding is provided in the form of cost-sharing between the recipient and CanExport. The applicant may apply for funding with a minimum budget of $20,000 and up to $100,000 per project.

The program funds up to 50% of eligible costs from $10,000 to $50,000 in funding per project. The applicant is responsible for the remaining 50% (in-kind contributions are not permitted).

With regard to IP, eligible expenses include:

• Filing a patent or industrial design application;
• Filing an application for the registration of a trademark or copyright; and
• IP professional services from a consultant and/or legal firm, which can include: the development of an international IP strategy, database search, drafting of formal IP documentation, and filing of IP documentation.

Brand owners should consider whether (1) they are eligible for these (or other) programs, and (2) whether it would be advantageous to their business to participate therein.

Sotos LLP provides Canadian and international businesses with a full range of IP-related legal and business services including trademark registration, IP protection and commercialization across a range of industries including technology, health, manufacturing, food service and hospitality, retail, consumer products and food and beverage. We can help businesses assess their IP needs, develop an IP strategy, protect trademarks and other IP rights, and determine whether government funding may be available to offset eligible IP costs.

If your business is considering trademark registration or other IP protection in Canada or internationally, contact our Intellectual Property team to discuss your options.

About the Authors

Anna Thompson-Amadei is a senior associate at Sotos LLP whose practice includes advising clients on trademark registration and other intellectual property protection. She helps businesses develop practical brand protection strategies that align with their growth and day-to-day business needs. Contact Anna at 416.572.7322 or athompson-amadei@sotos.ca.

Nicole Perez is an associate at Sotos LLP who advises clients on franchise and commercial matters. Contact Nicole at 416.977.3674 or nperez@sotos.ca.

The post Government Funding for Intellectual Property and Trademark Protection in Canada appeared first on Sotos LLP.

Canadian privacy laws regulate the collection, use, and disclosure of “personal information,” meaning information about an identifiable individual. Importantly, an individual does not need to be directly identified – information may still qualify as personal information where there is a serious possibility that the individual could be identified from that information. British Columbia,^[1] Alberta,^[2] and Quebec^[3] have generally applicable private-sector privacy laws that have been declared substantially similar to the federal Personal Information Protection and Electronic Documents Act (“PIPEDA”).^[4] In those provinces, the provincial legislation may apply instead of PIPEDA, while the remaining provinces are subject to PIPEDA. As a principles-based statute, PIPEDA establishes broad privacy obligations rather than bright-line rules.

The franchise model creates unique challenges related to privacy compliance because personal information is often shared among franchisors, franchisees, and third-party service providers. Determining who is responsible for protecting that information, maintaining compliance with privacy legislation, and responding to data breaches can be complicated. The following are some of the key privacy risks facing franchise systems and steps that franchisors and franchisees can take to mitigate them.

Key Privacy Risks & Considerations

Uncertainty Regarding Control and Responsibility for Customer Data

One of the main challenges in franchise privacy compliance is deceptively simple: whose data is it? Under the private sector privacy laws, organizations remain accountable for personal information within their control. Typically, an organization will be considered in control of personal information when it has the authority to determine how the information is collected, used, disclosed, retained, and disposed of. An organization remains accountable for personal information transferred to a third-party for processing on its behalf and must use contractual or other means to provide a comparable level of protection. Where information is instead disclosed to an independently operating franchisee or other organization for that organization’s own purposes, the parties’ respective responsibilities will depend on the circumstances, including who determines the purposes and means of collection, use, disclosure, retention, and disposal.

It is common for both franchisors and franchisees to collect and distribute personal information across their respective networks, as well as to third-party service providers. This data may be distributed for a number of reasons, including for marketing campaigns, sales reporting, and loyalty programs. For example, a franchisor may obtain identifiable sales data from a franchisee, and a franchisee may share customer information with a food delivery platform or other vendor. This complex and frequent exchange of information can make it difficult to determine who controls the data where clear roles and responsibilities have not been established. Accountability over the information becomes even more challenging when franchisees within the same franchise system employ inconsistent methods of data collection and consent practices. Because privacy legislation imposes obligations on organizations that control personal information, ambiguity surrounding who has that control can make it harder to comply with the law.

Increased Exposure to Cyber Attacks and Data Breaches

Another major area of concern for franchisors and franchisees alike is the risk of cyber attacks. Franchise systems are attractive targets for hackers because they often rely on shared POS and IT systems to store large volumes of customer information across numerous locations. As a result, a data breach at a single franchise location may have consequences for multiple franchisees and the franchisor itself. Although shared technological systems can increase efficiency for the franchise network as a whole, they may also increase the potential impact of a security incident. Beyond the immediate disruption to business, a data breach can expose a franchise system to reputational harm, the disclosure of confidential business information, regulatory investigations, audits, complaints, and potential civil liability.

For these reasons, it is important that franchisors and franchisees keep their privacy-related obligations in mind, in order to avoid accidental non-compliance with the law as well as to protect the franchise system.

The following is a list of best practices that can help mitigate privacy risks and strengthen compliance across the franchise network.

Best Practices for Franchise Privacy Compliance

Clearly Define Control Over Customer Data

Because information frequently moves between franchisors, franchisees, and third-party vendors, clearly defining responsibility for that information is one of the most important steps a franchise system can take to strengthen privacy compliance. Under PIPEDA, organizations are obligated to protect transferred personal information via “contractual means”.^[5] Where the information is passed between franchisor and franchisee, the parties should address the control and use of any customer information in the franchise agreement, an ancillary agreement, or the franchisor’s operations manual. Where a third-party service provider is involved, the franchisor or franchisee should ensure any contract between the parties includes an adequate data protection agreement or data protection provisions in the service agreement.

Before entering these contracts, franchisors and franchisees should consider what personal information is being exchanged, whether the information is necessary for the services provided, and how consent can be adequately obtained from customers. Any agreement should also specify which party is responsible for obtaining consent and for safeguarding the data. When contracting with third-parties, franchisors and franchisees should ensure the agreement allows them to maintain adequate control and protection over the use of the information by the service provider.

Implement Consistent Privacy and Consent Practices Across the Franchise System

Consistency across the franchise network is also critical in privacy compliance. As discussed above, franchise systems often involve numerous franchisees collecting and processing customer information in various ways. Without standardized privacy and consent practices, franchisors may find it difficult to ensure compliance with privacy laws across the system and may face increased regulatory risk. Franchisors should therefore implement uniform standards across the system when it comes to obtaining customer consent and handling customer data. Privacy policies and consent practices should also be updated on a regular basis to ensure they remain current and accurately reflect how customer information is being collected, stored, and used by the organization. Each organization subject to applicable privacy legislation should designate an individual responsible for its compliance. A franchisor may also appoint a privacy lead to coordinate standards and oversight across the franchise system.

Adopt a Data-Minimization Approach

Limiting the amount of personal information collected in the first place can help reduce privacy risk and makes compliance with privacy legislation easier. Under PIPEDA, the collection of personal information must be limited to what is necessary for purposes identified by the organization, and those purposes must be ones that a reasonable person would consider appropriate in the circumstances.^[6] Franchisors and franchisees should therefore carefully evaluate what information is truly required for their business operations and avoid collecting unnecessary data.

A data minimization approach also has the added benefit of reducing the organization’s obligations to manage, secure, and retain the information appropriately. Collecting only what is necessary reduces the amount of data that the organization is responsible for and can lessen the potential impact of a cyber attack or data breach. Organizations should not ordinarily make access to a product or service conditional on consent to collection, use, or disclosure that is unnecessary for that product or service. Secondary uses such as marketing should be clearly explained and supported by an appropriate form of consent, subject to any applicable statutory exceptions.

Strengthen Cybersecurity Practices

Franchisors should also take steps to strengthen their technology and cybersecurity practices across the franchise system. Operations manuals should set out cybersecurity standards and include clear IT hardware and software requirements for franchisees. Cybersecurity threats are constantly evolving, and a system that was once considered safe several years ago may no longer offer sufficient protection today. Franchisors should therefore regularly review and update their technology standards to ensure they can adequately respond to emerging risks. Franchise agreements and operations manuals should also clearly outline who is responsible for managing the aftermath of a breach.

In addition, franchisors should provide ongoing training and guidance to their franchisees on the collection, storage, and protection of customer information, including how to recognize and respond to phishing attempts. Finally, given the high rate of employee turnover in the retail and food service industries, franchisees should periodically update passwords and maintain security measures to reduce the risk of unauthorized access to sensitive information.

Prepare for Data Breaches Before They Occur

Because franchise systems are particularly attractive targets for cyber attacks, franchisors should prepare for a breach before one occurs. A comprehensive crisis plan can help reduce operational disruptions, ensure compliance with privacy legislation, and minimize harm to customers and the franchise brand. The plan should clearly identify who is responsible for managing each aspect of the response and require franchisees to cooperate with the franchisor throughout the process. Additionally, organizations are subject to reporting and record-keeping obligations under PIPEDA in the event of a breach. For example, organizations subject to PIPEDA must maintain records of all breaches of security safeguards involving personal information under their control. Where it is reasonable to believe that a breach creates a real risk of significant harm to an individual, the organization must also report the breach to the Office of the Privacy Commissioner of Canada and notify affected individuals.

Conclusion

Privacy compliance is not only a legal issue but an operational and reputational concern as well that affects the entire franchise system. The interconnected nature of franchise relationships can make it difficult to determine responsibility for customer information and can increase exposure to cybersecurity risks. By implementing clear and consistent privacy practices across the entire franchise system, minimizing data collection, and adequately preparing for cybersecurity threats, franchisors can better protect both customer information and the franchise as a whole.

How Sotos Can Help Franchise Systems with Privacy Compliance

Privacy compliance in a franchise system often sits at the intersection of franchise agreements, operations, technology, cybersecurity, and third-party relationships. Sotos LLP can help franchisors assess how personal information moves through their systems, clarify responsibilities between franchisors, franchisees, and service providers, review privacy and data-protection provisions in franchise and vendor agreements, and develop practical privacy policies and incident-response protocols.

If you have questions about privacy compliance in your franchise system, contact Jason Brisebois by email at jbrisebois@sotos.ca or by phone at 416.572.7323 to discuss how these issues may apply to your system.

About the authors:

Jason Brisebois advises franchisors and other businesses on privacy and data protection, including privacy compliance, commercial agreements involving data, and privacy considerations in franchise and technology arrangements. He received the 2024 Lexology Client Choice Award and has been recognized by the Canadian Legal LEXPERT Directory, Lexology Index: Canada, and Best Lawyers in Canada.

Chrisoula Angelis is a 2026 summer student at Sotos LLP and contributed to the research and preparation of this article.

The post Who Controls Customer Data in Franchise Systems? Key Privacy Risks and Best Practices appeared first on Sotos LLP.

Investors increasingly buy shares in companies that trade on the exchanges of multiple countries. Capital markets are global — Canadians wish to invest in foreign companies and foreign companies wish to raise capital from Canadians.

When disclosure is incomplete or misleading, the legal response in Canada — unlike the U.S. — can be global too. A shareholder who bought on a U.S. exchange can still sue in a Canadian class action, and an asset manager may need to evaluate recovery options in more than one jurisdiction.

Shareholder rights in the U.S. are more geographically constrained. Specifically, investors can only seek recovery in U.S. federal court for losses related to shares purchased on a U.S. exchange.

In Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), the U.S. Supreme Court adopted a bright-line, transaction-based limit on the reach of U.S. federal securities law, limiting its reach to, “the use of a manipulative or deceptive device or contrivance only in connection with the purchase or sale of a security listed on an American stock exchange, and the purchase or sale of any other security in the United States.”

The practical effect is that U.S. cases are tethered to U.S.-exchange purchases and domestic transactions.

That rule narrows who gets access to U.S. courts, even when the alleged misstatements are the same, the disclosure was global and the harm was widespread. It also means that many investors holding cross-listed stocks — who purchased shares on both U.S. and non-U.S. exchanges — are unable to seek full recovery in U.S. courts alone.

The Canadian approach

Ontario, where most Canadian securities class actions are filed, has specifically rejected the U.S. exchange-based rule for jurisdiction in securities class actions.

Instead, Ontario courts focus on whether there is a “real and substantial connection” to the province. That could include being listed on a Canadian exchange, having significant operations in Canada, etc.

Applying this flexible standard, Ontario courts have certified classes that reach far beyond Canadian borders.

If a real and substantial connection exists, the court may certify a class that reaches beyond Canadian residents and beyond Canadian exchanges. The practical result for investors who have purchased shares on both a Canadian exchange and a foreign exchange — U.S. or otherwise — is that they can seek full recovery in a single proceeding in Canada.

Ontario’s long-arm jurisdiction

In Longair v. Akumin Inc., 2024 ONSC 3675, the court dismissed outright arguments that a proposed class action should be limited to shares purchased on a Canadian exchange, or that respect for foreign courts requires Ontario to step back in favour of a “place of trading” norm.

The relevant shares were traded on the Toronto Stock Exchange and NASDAQ. The core points include:

• Ontario securities law does not contain a “place of trading” limitation.
• Ontario courts can exercise “long-arm” jurisdiction where the defendant has a real and substantial connection to Ontario.
• There is no norm requiring these claims to be heard only where the securities traded.

Akumin Inc. is part of a broader trend — Ontario courts are prepared to certify classes that include foreign-exchange purchasers when Ontario has a close connection to the issuer and the dispute. The courts manage overlap issues through case management rather than by adopting the bright-line exchange-based approach relied on by the U.S. Supreme Court in National Australia Bank.

Claims listed exclusively on foreign exchanges

Akumin Inc. confirmed that with a cross-listed issuer, foreign claimants could bring their claims related to shares purchased on a non-Canadian exchange in an Ontario court. However, this is not the limit of the kinds of claims Ontario courts will hear.

A company listed exclusively on a foreign exchange may be sued for alleged misrepresentations in its disclosure in an Ontario securities class action even if it is not listed on any Canadian exchange.

Abdula v. Canadian Solar, 2015 ONSC 53 confirmed that an issuer listed on a foreign exchange can still face an Ontario securities class action if it has a sufficiently close connection to Ontario. Canadian Solar, incorporated under the Canadian federal corporate statute, was listed on the NASDAQ and less than 4% of its shares were beneficially owned by Ontario residents.

Listing on a foreign exchange does not bar a Canadian class action if the company’s operations establish a meaningful connection to Canada.

The location of the underwriter

In Kamrani-Ghadjar v. Anaergia, 2025 ONSC 2167, the court confirmed that for IPO misrepresentation claims, it is irrelevant whether the selling underwriter was domestic or foreign. Anaergia included both secondary market claims (claims related to freely trading shares) and IPO claims (claims relating to newly issued shares).

Some of the underwriters for the IPO claims were Canadian and others were non-Canadian. The defendants argued that non-Canadian underwriters should be excluded. The court disagreed, holding that it did not, “see why a global class should exclude purchasers who bought from non-Canadian underwriters ”

For investment advisors, this raises important investor protection considerations with direct client service implications. Clients with concentrated positions in companies that are defendants in a class action may receive notices from more than one jurisdiction, and may need to consider which proceedings to participate in.

This is also a governance issue for portfolio managers and institutional investors. A fund may need a litigation participation policy and process for: (i) mapping trading history by exchange, (ii) tracking parallel Canadian and U.S. proceedings and (iii) deciding whether to remain in one class, participate in both where possible or opt-out strategically depending on the claims, available damages and the proposed releases.

Three takeaways:

1. Canadian jurisdiction is connection-driven, not exchange-driven. Akumin Inc. reinforces that Canadian courts have specifically rejected National Australia Bank’s exchange-based logic.
2. Foreign-exchange purchasers may still be liable in a Canadian lawsuit. Canadian Solar remains a strong example of Ontario courts’ willingness to hear claims where the issuer has a “real and substantial connection” to Ontario.
3. Foreign underwriters may be liable in a Canadian lawsuit. As underscored in Anaergia, other capital market participants like underwriters, even those situated abroad, may also find themselves before Canadian courts defending securities misrepresentation claims.

Part 2 of this series will look at the next set of practical differences between Canadian and U.S. securities class actions: thresholds to proceed, liability for misleading forecasts and projections and how damages calculations can diverge across the border.

This article originally appeared in Investment Executive. 

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Franchise systems typically derive much of their value from information—the systems, processes, data, know-how and relationships that distinguish them in the marketplace. This blog series explores how Canadian law protects those intangible business interests, where the limits of that protection lie, and what franchisors can do—proactively and reactively—to safeguard them.

When Sotos LLP assists franchisors in designing or refining their franchise systems, we offer a tailored audit of their intellectual property to ensure it’s properly protected. This proactive service helps identify potential vulnerabilities and establish safeguards, supporting the long-term value and success of our clients’ systems.

Why Confidential Information Matters

For many franchise systems, confidential information constitutes the core of the business. Operation manuals, pricing strategies, supplier terms, customer data, marketing plans, technical data, and proprietary systems and know-how are often what make a brand scalable, defensible, and valuable.

Yet confidential information is also uniquely vulnerable. Unlike physical assets, it can be copied instantly, transmitted invisibly, and misused long after a relationship ends. Canadian law does protect confidential information, but that protection is not always automatic. It can depend on how the information was created and controlled.

Protecting confidential information is important not only because of its value to the franchisor’s business, but also because the consequences of a breach may extend beyond the immediate actor. In some circumstances, a franchisee’s improper disclosure of customer or system information may expose the franchisor itself to legal and/or reputational risk.

This first post in the series provides a foundational overview: what counts as confidential information, how does the law protect it, and what should franchisors be thinking about now to reduce risk later.

What Is Confidential Information?

At a high level, confidential information is information that courts have described as having a “quality of confidence about it”. To determine whether information possesses this quality, consider the following non-exhaustive list of factors:

• The extent to which the information is known outside the franchisor’s business;
• The extent to which it is known by corporate employees and/or franchisees and others involved in the franchisor’s business;
• The extent of measures taken by the franchisor to guard the secrecy of the information;
• The value of the information to the franchisor and its competitors;
• The amount of money or effort expended by the franchisor in developing the information; and
• The ease or difficulty with which the information could be properly acquired or duplicated by others (e. by their independent endeavours).

Against that backdrop, and speaking generally, the more resources and skill expended to create the information, the greater the market value of the information, and the more comprehensive a franchisor’s efforts to safeguard the information, the more likely that information will be considered to be confidential, and thus capable of protection.

How Does the Law Protect Confidential Information

Unlike statutory protections for intellectual property such as trademarks or patents, confidential information is primarily safeguarded through the common law in Canada. There is no comprehensive legislative framework for the protection of confidential information. Instead, remedies for misuse are developed through established common law principles.

When a franchisor’s confidential information is misappropriated, the law offers several avenues for redress, often including requests for urgent injunctive relief to prevent further damage. Common legal claims for the protection of confidential information include:

• Breach of Confidence. A franchisor may bring a claim for breach of confidence when it can demonstrate that the information in question is confidential in nature, was disclosed in circumstances where an obligation of confidentiality existed, and has been improperly used or disclosed. In the franchise context, this commonly arises where a franchisee or former employee seeks to use proprietary information—such as trade secrets, operations manuals, supplier lists, or customer lists—to benefit a new or competing venture.
• Breach of Contract. A franchisor may also pursue a breach of contract claim if the defendant has violated a specific confidentiality provision agreed upon in a contract. For example, franchise agreements often include clauses that impose an explicit duty of confidentiality on franchisees. A breach occurs when the defendant improperly discloses, uses, or misappropriates confidential information contrary to the terms of its contractual obligations. Given the nature of franchise relationships, this often arises when a franchisee uses confidential system information to create or help others create a competing business.
• Breach of Fiduciary Duty. In certain business relationships, a fiduciary obligation may exist, such as between a senior executive and a franchisor. A breach of fiduciary duty claim arises when a fiduciary misuses confidential information entrusted to them in a manner that undermines the interests of the beneficiary. For example, if a senior executive leaves a franchise system to join or start a competitor, and in doing so improperly utilizes or discloses confidential information gained during their tenure, this constitutes a breach of their fiduciary duty. The franchisor may seek damages or injunctive relief to prevent further misuse of the confidential information.
• Unjust Enrichment. Where a party has improperly benefited from the misuse of confidential information, a claim for unjust enrichment may be available. This claim seeks to prevent the party from retaining the illicit benefits derived from the misappropriation. In the context of a franchise system, unjust enrichment claims may be brought if a former franchisee uses proprietary business methods, marketing strategies, or customer information to establish a competing business and gain a financial advantage at the franchisor’s expense. The court may order the return of any unjust profits or impose equitable remedies to remedy the wrongful benefit.
• Copyright Infringement. There is often an overlap between confidential information and information protected by copyright. Copyright protection arises automatically when an original work is created and fixed in a tangible form. Where a confidential work is also subject to copyright, the unauthorized reproduction, use, or distribution of that work may give rise to statutory claims for copyright infringement, in addition to any common law remedies available for misuse of confidential information. For example, a third party that copies or adapts a franchisor’s operations manual for use in a competing franchise system may be liable for copyright infringement.
• Potential Criminal Liability. The Criminal Code also provides for criminal sanctions in cases of the improper disclosure of trade secrets under sections 391(1) and (2). While criminal charges are infrequently pursued in the context of confidential information breaches, they remain an option where the conduct crosses the threshold of dishonesty or fraud.

How Can Franchisors Protect Their Confidential Information?

While later posts in this series will address specific risk areas, several high-level principles apply universally.

• Identify What Matters. Not all information warrants the same level of protection. Franchisors should clearly identify what information is confidential, who needs access and who does not, and whether sufficient systems are in place to protect information from inadvertent or improper disclosure.
• Use Clear, Enforceable Agreements. Contracts remain a primary, preventative line of defence to breaches. These may include confidentiality and non-disclosure agreements, employment and contractor agreements, and franchise agreements with robust information-protection provisions.
• Limit and Control Access. Access should be need-to-know, supported by passwords and access controls. Clear policies governing use and disclosure should also be in place.
• Act Consistently With Confidentiality. How a franchisor behaves matters. Marking documents as confidential, training staff, and responding promptly to breaches all signal that the information is confidential in nature and deserving of protection.
• Prepare for Exit Events. Departures, whether by franchisees, executives, or employees are high-risk moments. Advanced planning is essential.

How We Can Help

If you have questions about protecting your confidential information or would like assistance assessing your current protective framework, Sotos LLP regularly advises franchisors on these issues and would be pleased to assist.

About the Author

Daniel Hamson, Sotos LLP

Daniel is a partner in the Litigation Department at Sotos LLP. His practice focuses on complex commercial, corporate, and franchise disputes.

Daniel has been recognized for his litigation work and industry expertise. He is listed as “Ones to Watch” in Best Lawyers in Canada and has been named a “Lawyer to Watch” in the Canadian Legal LEXPERT Directory, as well as in the LEXPERT Canada’s Leading Litigation Lawyers. He is also recognized as “Recommended” in Lexology Index: Canada (formerly Who’s Who Legal).

Daniel can be reached directly at 416.572.7303 or dhamson@sotos.ca.

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When it comes to protecting intellectual property in franchising, trademarks tend to dominate the conversation, largely because the franchise system’s name and logo are often the key drivers of brand recognition and success. However, one of the assets in franchised businesses that is often overlooked are copyrighted materials.

What does copyright protect?

In Canada, copyright arises automatically, without formal registration, upon the creation of an original work in a tangible form. Copyright protects the expression, but not the underlying idea. Under Section 3(1) of the Copyright Act, R.S.C., 1985, c. C-42 (the “Act”), copyright grants the owner the exclusive rights to produce, reproduce, publish, perform, communicate, or adapt an original work.[1] This includes the right to authorize others, for example franchisees, to use the work or  material under certain conditions.

Works that are protected by copyright include:

• Literary works (e.g. computer programs, compilation of literary works);
• Dramatic works (e.g. choreographic work, mime, scenic arrangement, cinematographic work, compilation of dramatic works);
• Musical works (e.g. music or musical composition with or without words, compilation of musical works); and
• Artistic works (e.g. paintings, drawings, maps, charts, plans, photographs, sculptures, works of artistic craftsmanship, architectural works, compilation of artistic works).[2]

While copyright arises automatically, there are benefits to registering copyright with the Canadian Intellectual Property Office (“CIPO”). Once the application is submitted and the application fee is paid, a registration certificate and registration number will be issued to the applicant within seven business days.[3] The certificate is deemed presumptive evidence that the registered owner owns the copyright.  It can be beneficial in litigation proceedings and in warranting ownership of the copyright to prospective licensees of a work.

How does copyright apply in the context of franchising?

Although registration is not required, registering copyright can be useful in the franchising context. One of the basic premises of the franchise model is that, in return for ongoing payments, the franchisee receives the right to use some of the franchisor’s intellectual property, subject to certain conditions. This includes everything from training manuals, advertising and promotional materials, website content, proprietary software, computer software, menus, newsletters to employees or customers, and operations manuals.[4] Obtaining a copyright registration for these materials helps to ensure that there is no unauthorized use of the materials including by terminated franchisees.  It also allows the franchisor to enforce its rights more effectively and to ensure that it has the exclusive right to commercially benefit from the use of the materials.

Canadian franchise law does not specifically regulate copyright. However, the disclosure requirements under the provincial franchise legislation can be interpreted as requiring franchisors to describe all intellectual property licensed to the franchisee.[5] Franchisors should ensure that their franchise disclosure document clearly articulates who owns the copyright. For example, if a third party contractor has been hired to create the materials (such as the training materials, software, or brochures), the contractor, as the author, owns the copyright and not the franchisor. To avoid any future disputes, the franchisor should ensure that it obtains a fully executed assignment of the ownership of the materials or an exclusive licence to use the materials.[6]

What is the importance and benefit of copyright protection for franchisors?

There are compelling reasons for franchisors to register a copyright in their materials. Copyright registration serves as strong evidence of ownership and ultimately provides a creation date, which is invaluable in the event of a future dispute. It also strengthens enforcement efforts, making it easier for franchisors to stop the unauthorized use of the materials and to pursue infringement claims more effectively. This helps to prevent any misuse of the brand’s materials and intellectual property which could damage the brand’s reputation or result in a financial loss. Additionally, it is important to include clear copyright provisions in franchise agreements by defining ownership and the permitted uses allowed by the franchisee. This can help to lower the risk of disputes or litigation arising from the improper or unauthorised use of materials.

Beyond the legal and financial advantages, effective copyright registration and protection supports the foundation of a successful franchise – brand consistency. Franchisors require that all of their locations are uniform in appearance and presentation so that customers receive the same experience, regardless of where they interact with the brand. One of the primary ways to achieve this uniformity and consistency is by franchisors allowing franchisees to use their intellectual property, and specifically the franchisor’s copyrighted material. The distribution of proprietary characters, music, logos, marketing materials, training materials, digital content, uniforms, menus, and even store layouts contributes to maintaining that uniformity. Protecting these assets not only maintains specific quality and standards but also fosters customer trust and loyalty, which helps to reinforce brand reputation and contributes directly to the franchise system’s growth.

Copyright protection can provide franchisors with a competitive advantage and provide an additional revenue stream through licensing the proprietary materials in certain circumstances. A well-protected copyright portfolio can enhance the marketability of the franchise system itself, making it more attractive to prospective franchisees, investors, and partners, all of whom value a well-protected and unique brand. Safeguarding copyright is not just about compliance, but is essential for protecting reputation, deterring infringement, and securing long-term success.

Conclusion

For Canadian franchisors, effective copyright management is essential to protecting some of the core elements of its franchise system. These are assets of their business that require protection, and copyright should therefore be part of the discussion when establishing their franchise system and drafting their franchise agreement and disclosure documents.

At Sotos LLP, our intellectual property team provides full-service, practical support across all aspects of IP protection. We can assist not only with registering your copyright, but also with developing and implementing copyright and trade mark strategies, conducting IP audits, preparing and negotiating licensing and data-sharing arrangements, and enforcing your rights through opposition, infringement, counterfeit, and other litigation proceedings, so that your brand and proprietary materials are properly protected as your franchise system grows.

About the authors

Anna Thompson-Amadei is an associate at Sotos LLP whose practice includes advising clients on trademark and other intellectual property protection, aligning practical brand protection strategies with the growth and day to day needs of their business.

Bailee Kleinhandler is an associate at Sotos LLP in the corporate and commercial group and is building a diverse practice in corporate and franchise law.

[1] Copyright Act, RSC, 1985, c C-43 at s 3(1).

[2] Ibid at s 2 and 5(1).

[3] Government of Canada, Canadian Intellectual Property Office, How your application for registration of a copyright is processed (August 7, 2022). https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/copyright/how-your-application-registration-copyright-processed.

[4] Valerie Brennan, “Copyright Protetion for the Franchised Business” (2024) 43:4 Franchise L.J. at 32.

[5] Arthur Wishart Act (Franchise Disclosure), 2000, SO 2000, c 3 at s 5(4).

[6] Copyright Act, RSC, 1985, c C-43 at s 13(4).

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Background

David and Elizabeth planned to go skiing at resorts north of Toronto. When they were purchasing their tickets, they signed the ski resorts’ respective waivers of liability for injuries they might suffer at the resorts. They went skiing but both had accidents. They sued the ski resorts for their damages.

The question became whether the waivers of liability that David and Elizabeth had signed were valid.

Two competing pieces of legislation applied to their circumstances. David and Elizabeth were consumers as defined under Ontario’s Consumer Protection Act (“CPA”). They were also persons entering the resort premises for which the ski resorts were responsible. Therefore, Ontario’s Occupiers’ Liability Act (“OLA”) also applied.

The Court of Appeal’s Decision

The two statutes could not be reconciled: the CPA states generally that waivers of liability or warranty are void with respect to consumers. The OLA permits waivers of liability with respect to certain premises onto which other persons enter.

The Court of Appeal decided that because the language used in the OLA was more specific than the CPA, the OLA should govern. Therefore, the waivers of liability were valid under the OLA and not void under the CPA.

In making its decision, the Court of Appeal considered the original legislative intent underlying the waivers provision in the OLA. The goal was to encourage private landowners to make their properties available to others for recreational use without allowing the fear of liability to get in the way. On the other hand, the Court found no intent in the history of the CPA to show that the legislature intended to ban a waiver of the duty of care towards visitors of premises that are captured by the OLA.

Significance of the Decision

The Court’s decision will have significance for many businesses especially those offering play, sports, and recreational services. If properly drafted and presented, waivers that are given by the consumers of such activities will provide a defence to owners or operators of such businesses. Lawyers at Sotos LLP regularly advise business operators in the restaurant and hospitality industry as well as sports and recreational enterprises on all aspects of their liability towards their customers and staff.

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In particular, PIPEDA requires compliance with the ten key privacy principles of the Model Code for the Protection of Personal Information developed by the Canadian Standards Association.  One of the fundamental principles is openness and requires organizations to provide information to the public about policies and practices relating to the management of personal information. The openness principal requires businesses to include information on who is accountable for the organization’s policies and practices and to whom complaints can be forwarded. Details on gaining access to personal information, a description of the type of personal information held by the organization, and disclosure of personal information made available to related organizations, must also be provided.

While establishing a privacy policy is an obligation under PIPEDA, it is also key to building trust with consumers. A company’s approach to privacy can either build or hamper consumer confidence in a company. In fact, various studies have established a link between a company’s privacy policy and consumer trust. Yet, many businesses do not dedicate sufficient resources or time to developing an effective privacy policy.

In 2013, the Office of the Privacy Commissioner of Canada (OPC), the mandated guardian of privacy in Canada responsible for enforcing PIPEDA, participated in an international privacy sweep which involved assessing the online privacy policies of Canadian businesses. The sweep found major shortcomings in the privacy policies of Canadian businesses, ranging from no privacy policy at all to lengthy and overly legalistic policies. Five years later, businesses’ privacy policies remain a key area of concern in the minds of stakeholders and from the perspective of the OPC.

Finding information on a business’s privacy practices usually involves scrolling to the bottom of the business’s website homepage and clicking on a link that takes you to the business’s privacy policy. Oftentimes, consumers skip over online privacy policies due to their length and complexity. Yet, privacy laws require consumers to understand what they are consenting to and online privacy policies are often a key (and only) mechanism for obtaining informed consent.

When privacy policies are overly technical, legalistic, or lengthy, they hinder the intention behind establishing a privacy policy in the first place. By the same token, when privacy policies are a few sentences in length, they cannot possibly provide a consumer with sufficient information to make a meaningful decision regarding consent. There is an obvious balancing act between establishing a clear, user-friendly privacy policy and ensuring that sufficient information about the collection, use, and disclosure of information is provided.

In finding the appropriate balance between user-friendliness and providing sufficient information, practical guidance can be gleaned from reviewing the published summaries of investigations conducted by the OPC on businesses’ privacy practices. For instance, in one investigation, a web-based company learned that it must identify specific retention periods and the reasons for such retention periods (for instance, disclosing the fact that contact information is retained for 7 years to comply with the Income Tax Act). In another investigation, an airline company learned that it must inform customers through its privacy policy that it may provide personal information to third parties contracted to perform functions on its behalf (in the case of the airline company, information was shared with a third party to conduct surveys on behalf of the airline). Such lessons can be useful for businesses trying to determine what information to include and what level of detail is required in their privacy policies.

Beyond information contained in OPC investigations, the OPC has published a wealth of information, including guidelines on establishing an effective privacy policy as well as a helpful privacy toolkit for businesses.  Most recently, consultations wrapped up on OPC guidelines for obtaining meaningful online consent. In its draft guidelines, the OPC has developed seven key guiding principles for online consent, which include:

(1) emphasizing key elements about the collection, use, and disclosure of personal information;

(2) allowing individuals to control the level of detail regarding information practices by presenting information in a layered format;

(3) providing consumers with a clear option to say “yes” or “no”;

(4) being innovative (i.e. no one-size-fits all approach);

(5) considering the consumer’s perspective by making the information user-friendly;

(6) ensuring the effectiveness of consent processes, and

(7) making consent an ongoing process.

The development of these guidelines stem from recognition that establishing privacy policies and obtaining meaningful consent from consumers is becoming increasingly challenging in this digital age.

While determining how to present information on privacy practices may be somewhat challenging and, at times, unclear, what is clear is that a business’s privacy policy should not be a standard, one-size-fits-all document lacking real substance. A privacy policy should reflect a business’s actual practices, mechanisms, and measures put in place on the collection, use, and disclosure of customer information.

An important component and starting point for businesses integral to the development of a privacy policy is the appointment of a privacy officer. Businesses governed by PIPEDA are required to appoint an individual responsible for privacy management – this is an element of the accountability principal contained in the Model Code for the Protection of Personal Information. A privacy officer should not simply be a title without substance or integrity. Instead, a privacy officer’s role is vital to establishing accountability within an organization. Developing a privacy program involves training employees and ensuring that procedures are in place to protect personal information and respond to complaints. In turn, a business’s privacy policy is its declaration to consumers that it has implemented an effective privacy program and has carefully considered the manner in which personal information will be handled.  Accountability, as established through the development of a privacy program, goes hand in hand with openness, achieved through the availability of a company’s privacy policy.

When accountability and openness related to privacy practices are not built into the fabric of an organization, the risk of a privacy breach and related erosion of consumer confidence, is high. Privacy breaches and the ineffective response to a privacy breach can destroy consumer confidence and cause serious damage to a brand. Take, for instance, the recent example of the Uber 2016 data hack involving the personal information of millions of users across the globe, which was only disclosed in late 2017 after an initial cover-up by the company.  Uber’s failure to disclose the data breach has led to government investigations, lawsuits, and the erosion of consumer trust.

Growing concerns over the handling of Canadians’ information have led to OPC recommendations to strengthen enforcement mechanisms, including disclosure of breaches and fines for non-compliance.  While such measures, if introduced, may persuade more businesses to ensure they are compliant with privacy laws, the biggest incentive for business should be their long-term viability which depends, in large part, on consumer trust. Businesses depend on consumer confidence to forge ongoing loyalty to a brand.  One poorly handled data breach can destroy a brand.

Given the importance of privacy in an increasingly digital world, companies ought to carefully consider their privacy policies. Establishing an effective privacy policy that is backed up by meaningful internal procedures and practices makes sense from a business perspective. Developing a clear privacy policy is a mechanism for building trust with consumers; it is an opportunity for a business to show that it values, and understands the importance of, the privacy of its consumers.

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Canada has one of the most robust privacy regimes in the world. Recent amendments to its anti-spam legislation (CASL) demonstrate the strict approach taken towards the safeguarding of personal information and individual privacy – key considerations for any e-commerce strategy. The CASL amendments have strengthened the law around the sending of unsolicited e-mail and other communications (i.e. SPAM) by requiring that recipients provide their consent to being contacted. Canada’s federal privacy statute, the Personal Information Protection and Electronic Documents Act (PIPEDA), which regulates the collection, use and dissemination of personal information, requires e-commerce participants to have privacy policies in place, and to appoint privacy officers to address consumer complaints. Gone are the days of companies collecting vast amounts of personal data and freely using it to market and promote to consumers. In order to do business online, however, retailers must collect personal information, such as names, addresses, e-mails, phone numbers, financial information, and the like. The limited use and safeguarding of that sensitive data is a key consideration for any online business. Grocers are just the latest example of industry participants competing for market share via e-commerce, and in doing so, should ensure they have adequate legal strategies in place to address the implications of transacting online.

Online retailers also face new challenges in digital advertising and marketing. In light of the global reach of online communications, traditional legal considerations for in-store advertising are no longer sufficient. The cornerstone of advertising law is a prohibition on false, deceptive, and misleading ads. In retail, consumer complaints often centre on misleading pricing or promotions. In the online realm, ask yourself whether it is misleading to advertise US dollar prices to Canadian consumers. Must a website be viewed in Canada for a consumer to be considered “Canadian”? Must advertised pricing cater to the location of the viewer? These are some of the complex questions facing traditional retailers looking to establish a foothold in e-commerce.

Last year, the Ministry of Health and Long-Term Care launched its “Healthy Eating” strategy, which includes proposed restrictions on advertising certain foods and beverages to children.  It might, however, prove difficult for authorities to determine whether an ad is targeting children. In the past, ads appearing on weekend morning television were relatively easy to identify as targeting children, while those appearing on late-night television or in the newspaper were often deemed to be adult-oriented. In the online era where people of all ages have access to internet content, identifying the target audience has become increasingly complex, thereby making it difficult for advertisers to comply with applicable laws.

The regulation of e-commerce happens at two levels: the federal government primarily handles aspects relating to privacy and the internet, while the provinces are responsible for local commerce and consumer protection.  This multi-layered governance structure combined with the unique issues facing online retailers requires a thoughtful legal approach and carefully planned out e-commerce strategy for grocers – the latest example of a traditional industry looking to do business online.

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