Canadian Franchise Disclosure Document

Company Officers Must Sign a Certificate on Canadian Disclosure Documents 

In Canada, unlike in the U.S., franchise disclosure documents must include a certificate signed by at least two persons who are officers or directors (Ontario Reg. 581/00 Section 7). 

In the Alberta case of Hi Hotel LP v. Holiday Hospitality Franchising Inc., 2007 ABQB 686 released December 21, 2007 the U.S. based franchisor delivered a disclosure document, but did not deliver the signed certificate.

When a dispute arose between the franchisor and the franchisee within the two year limitation period the franchisee delivered a rescission notice. 

Unlike the Ontario statute, under the Alberta Franchises Act and its Regulations a disclosure document is properly given if it is “substantially complete” (Alberta Reg. 240/95 Section 2(4)). Both parties sought summary judgment. The Judge ruled in favor of the franchisee. 

The lengthy decision can be summed up in the last few paragraphs:

[139] Holiday submits that in this case concluding or reading “must” as mandatory would not fulfill the object of the Franchises Act. It is submitted that the court should take a purposive approach and enforce the Franchises Act in a way that is consistent with the requirement to disclose information. 

[140] The purpose of the Franchises Act is not merely disclosure. The purpose is threefold. The second stated purpose is to provide civil remedies to deal with breaches of the Act including recession if a franchisor does not meet the requirements which must be met. 

[141] In the within case there is a complete failure to provide a Certificate of Franchisor, dated and signed, as the Franchises Act and Franchises Regulation require.  

[142] A franchisee is unable to waive the disclosure requirement. Section 18 of the Franchises Act provides: 18 Any waiver or release by a franchisee of a right given by this Act or the regulations or of a requirement of this Act or the regulations is void. 

[143] I conclude that an unsigned and undated document does not meet the requirement that it must be signed and dated. In my view the Certificates of Franchisor are a nullity and as such an essential element and requirement of the disclosure document was not provided. The production of signed and dated Certificate of Franchisor was a substantive requirement of the disclosure document. The disclosure document provided was not substantially complete.”

The Moral of the Story for U.S. Franchisors: Before sending out a disclosure document to Canada check that it includes a signed certificate.