April 24, 2024

New Horizons in Franchising: Understanding Saskatchewan’s Franchise Disclosure Act

By Jason Brisebois and Anna Thompson-Amadei

The Province of Saskatchewan may soon become the seventh province in Canada to enact franchise disclosure and relationship legislation. The Legislative Assembly of Saskatchewan introduced Bill 149, The Franchise Disclosure Act (the “Act”), for first reading on November 9, 2023.  If the legislature passes the bill, it will be the province’s first comprehensive franchise legislation, and represent a significant step towards uniformity in franchise laws across Canada, as Saskatchewan would join British Columbia, Alberta, Manitoba, Ontario, New Brunswick, and Prince Edward Island in having legislated protections in place for franchisees.

The Act was introduced after public consultation on the need for franchise legislation within the province. The framework of the consultation was based on the Uniform Law Conference of Canada’s Uniform Franchise Act (which Sotos LLP co-chaired). In response, the Canadian Franchise Association and Sotos LLP, among other parties, submitted a number of recommendations, including urging the province to follow the most recently enacted provincial franchise legislation, British Columbia’s Franchises Act, which came into force in 2017.

Having undergone its first and second readings in November 2023, the Act is anticipated to be enacted in 2024. Absent franchise disclosure and relationship legislation having been previously adopted in the province, franchise (and related) agreements are primarily subject to the common law of contracts, in addition to standard consumer protection regulations and rules that may apply.

If enacted, the Act will constitute a major change to the Saskatchewan franchise industry and its dealings, as it will place significant new disclosure obligations on franchisors, and offer new statutory remedies to franchisees that operate in the province.

Contents of the Act

The main features of the proposed Act include, but are not limited to, the following:

  1. Duty of Fair Dealing. Every franchise agreement will impose on each party a duty of fair dealing in the performance and enforcement of the franchise agreement. Further, each party will have a right of action for damages should the other party breach the duty of fair dealing.  The duty of fair dealing includes the duty to act in good faith and in accordance with reasonable commercial standards.
  2. No waiver of rights under the Act. Franchisees will not be able to waive any rights granted to them under the Act.
  3. Franchisee Rights to Associate and Form Associations. Franchisees will be permitted to form or join franchisee organizations and associations.
  4. Franchise Disclosure. Franchisors will be required to provide prospective franchisees with a disclosure document (containing certain prescribed information, as well as all material facts). Note that franchisors will need to update their existing disclosure documents to ensure that they can be safely and effectively used in the Province of Saskatchewan, once the legislation is effective. Franchisors should proactively work with legal counsel to ensure that such updates are in place prior to the effective date of the legislation, to ensure that franchise sales are not delayed or affected.
  5. Franchisee’s Right of Rescission. A franchisee will have the right to rescind a franchise agreement within 60 days after receiving the disclosure document if the contents of the disclosure document do not meet the requirements of the Act. The bill also provides that a franchisee may rescind the franchise agreement within two years after entering into the franchise agreement if the franchisor fails to provide the disclosure document within those two years.
  6. Damages. If a franchisee suffers a loss because of a misrepresentation contained in the disclosure document, the franchisee will have a right of action for damages against the franchisor.

When compared to other existing franchise legislation in Canada, specifically, Ontario’s franchise legislation, the Arthur Wishart Act (Franchise Disclosure) (the “AWA”), there are two notable differences with the Act:

  1. The Act provides that a franchisee may rescind the franchise agreement within two years after entering into the franchise agreement if the franchisor fails to provide the disclosure document “within those two years”. The reference to providing a disclosure document “within two years” is not contained in any of the other six existing franchise acts in Canada. This provision seems to suggest that if a disclosure document is not received by a franchisee prior to the execution of a franchise agreement, the franchisor can still meet its disclosure obligations within two years after the franchisee enters into the franchise agreement.
  1. One of the criteria to meet the definition of a “franchise” in the AWA is that the franchisor (or franchisor’s associate) has a right to exercise significant control or has a right to provide significant assistance (among other criteria). By contrast, the Act defines “franchise” as circumstances where the franchisor (or franchisor’s associate) exercises significant control over, or provides significant assistance in, the franchisee’s method of operation. As such, the Act requires that the franchisor take actual steps to exert control over the franchisee. Simply having the contractual right to do so does not appear to meet the proposed threshold.

Benefits of the Act

As stated above, should the Province of Saskatchewan proceed to enact franchise legislation, this would align it with the regimes of all western provinces, as well as Ontario, New Brunswick and Prince Edward Island.

In addition to making a positive stride towards uniformity across the provinces, the introduction of franchise legislation would also help protect consumers by allowing them to make informed investment decisions when purchasing a franchised business.

At Sotos LLP, we are committed to guiding franchisors through the evolving franchising landscape. The new Franchise Disclosure Act introduced in Saskatchewan brings substantial changes and new obligations that all involved parties must be aware of. Our team is proficient in both the new legislation and the established franchise laws across Canada. We provide a full range of legal services, including the drafting and reviewing franchise agreements, ensuring compliance with disclosure requirements, and representing clients in franchise-related disputes. Contact us today to align your franchise operations with the latest legal standards and safeguard your business interests in this dynamic sector.

Jason Brisebois, Sotos LLP

Jason Brisebois is a partner in Sotos LLP’s corporate and franchise law groups. He has received multiple legal accolades, including being named in the “Ones to Watch” category by Best Lawyers in Canada. Additionally, he won the Lexology 2024 Client Choice Award for Franchising in Canada and was recognized as a “Legal Eagle” by Franchise Times Magazine. Jason can be reached directly at 416.572.7323 or jbrisebois@sotos.ca.

Anna Thompson-Amadei, Sotos LLP

Anna is an associate with Sotos LLP in Toronto, Canada’s largest franchise law firm. She has been recognized as a “Legal Eagle” by the Franchise Times Magazine. Anna can be reached directly at 416.572.7322 or athompson-amadei@sotos.ca.