Legislative Update: Electronic Disclosure to Prospective Franchisees Coming to Ontario July 1, 2016
June 17, 2016
Effective July 1, 2016, Ontario will permit disclosure documents required under the Arthur Wishart Act (Franchise Disclosure), 2000 (Act) to be delivered electronically to prospective franchisees.
The Act provides that a disclosure document may be delivered personally, by registered mail or by any other prescribed method. In the 16 years since the Act was passed, no other permissible method of delivery has been prescribed, leaving personal delivery and registered mail as the only methods of delivery expressly authorized under the Act. Complicating matters further, registered mail is often not a viable option due to weight restrictions (maximum weight of 500 grams) and timing considerations (delivery times between two to eight days). But come July 1, 2016, the regulations under the Act will be amended to expressly authorize delivery of a disclosure document to a prospective franchisee by electronic transmission or by courier, if certain conditions are met.
WHAT CONDITIONS MUST BE MET?
The Ontario amendment to the regulations specifies the following conditions must be met in order to deliver a disclosure document electronically:
- The document must be delivered in a form that allows the prospective franchisee to view, store, retrieve and print it
- The document may not contain any links to external documents or content
- The document must contain an index for each separate electronic file comprising the document, where each index sets out the file name and, if the file name is not sufficiently descriptive of the subject matter of the file, a statement of the subject matter
- The franchisor receives written acknowledgment of receipt from the prospective franchisee
While many franchise practitioners have taken the view that personal delivery could be achieved through the use of a courier (to the extent that the courier delivered the disclosure document directly to the prospective franchisee in person), the updated regulation removes any doubt about the viability of delivering a disclosure document by courier by expressly providing that courier delivery is an acceptable method of delivery so long as the franchisor pays the cost of delivery.
The disclosure basics under the Act remain the same: a disclosure document (containing all material facts and all prescribed information) must be one document delivered to the prospective franchisee at one time at least 14 days prior to the franchisee’s signing the relevant franchise agreement and its paying any consideration in relation to the franchise.
The revised Ontario regulations also include an update relating to a franchisee’s delivery of a notice of rescission to a franchisor. The updated regulation permits delivery of a notice of rescission by courier in addition to the previously permissible methods of personal delivery, registered mail or fax.
STREAMLINING FRANCHISE REGULATION ACROSS CANADA
This regulatory change to allow electronic disclosure brings Ontario in line with all of the other Canadian jurisdictions that have franchise legislation in place and enhances the consistency across provincial franchise legislation. More specifically, the Manitoba, Prince Edward Island (P.E.I.) and New Brunswick franchise legislation all provide for electronic delivery of disclosure documents in substantially similar fashion, though they do have slight differences in language and the specific requirements.
The New Brunswick electronic disclosure regulation matches Ontario’s new regulation, except that the New Brunswick regulation does not include a requirement to obtain acknowledgment of receipt.
The Manitoba regulation also substantially matches Ontario’s new regulation but only requires that the prospective franchisee be able to “retrieve and process” the disclosure document, rather than “view, store, retrieve and print.”
The P.E.I. regulation has the most variation from the new Ontario regulation, as in addition to the same requirements as the Ontario regulation relating to non-permissibility of external links, written acknowledgement of receipt, and accessibility (ability to store, retrieve and print), P.E.I. does not require an index and also requires that the disclosure document:
- Be delivered as a single, integrated, document or file
- Contain no extraneous content beyond what is required or permitted by law
- Conform as to its content and format to the requirements of the law
The franchisor must also keep records of its electronic delivery of disclosure documents. This last requirement is consistent with the recommended practice for a franchisor to keep records of receipt of all disclosure documents.
Alberta’s franchise legislation is silent altogether on delivery requirements — and in practice, electronic delivery of disclosure documents is widely utilized.
British Columbia’s franchise legislation received royal assent on November 17, 2015, and is not yet in effect (it is pending publication of the regulations under that Act and it is expected there will be a waiting period to facilitate compliance with the new legislation). However, British Columbia’s Franchises Act expressly provides that a disclosure document may be delivered personally, by email or by any other prescribed method.
Overall, these regulatory changes are a positive step in modernizing Ontario’s franchise legislation and will be beneficial to franchisors, prospective franchisees and the environment alike.
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