On November 9, 2023, The Government of Saskatchewan introduced Bill 149, The Franchise Disclosure Act (the “Act”), which proposes a legislative regime that will govern franchised businesses in Saskatchewan, bringing clarity to both franchisors and franchisees in doing business under the franchise model.
The introduction of Bill 149 follows a month-long consultation process carried out by the Saskatchewan Ministry of Justice and Attorney General in which the public was invited to provide comments to the Government of Saskatchewan regarding the implementation of provincial franchise legislation based on the Uniform Law Conference of Canada’s Uniform Franchise Act. Currently, Saskatchewan is one of the few provinces that does not have legislation governing franchised businesses. Instead, the franchise relationship in Saskatchewan is governed by the principles of common law and the law of contracts.
As the name suggests, the primary focus of the legislation is to impose disclosure requirements on franchisors; however, “disclosure” is not the only element of the franchisor-franchisee relationship that would be impacted. Some of the key elements of the Act are as follows:
- Duty of Fair Dealing – Parties to a franchise agreement owe a duty to act in good faith and by reasonable commercial standards, ensuring fairness in their dealings.
- Franchisee’s Right to Associate – A franchisee has the right to associate with other franchisees and may form or join franchisee organizations without any penalty, interference, restriction or prohibition by a franchisor, allowing them to collectively address common concerns.
- Franchisor’s Obligation to Disclose – A franchisor is required to provide a prospective franchisee with adequate time and information to make an informed decision, or consult with a professional. Under the Act, franchisors will be required to provide prospective franchisees with a disclosure document at least 14 days before the signing of any agreement respecting the franchise or the payment of any consideration in relation to the franchise, whichever occurs earlier.
- Rescission – If the disclosure document provided by a franchisor is deficient or does not comply with the Act, a franchisee has the option, 60 days after receiving the disclosure document, to rescind the franchise agreement. Furthermore, if the franchisor fails to provide a disclosure document, the franchisee may rescind the franchise agreement, without penalty, at any time within 2 years after entering the agreement.
- Damages – A franchisee may commence legal action against any individual who signed the disclosure document if the franchisee has suffered losses as a result of a misrepresentation in the disclosure document or the franchisor’s non-compliance with the Act.
- Rights Cannot be Waived – Except in accordance with the provisions of the Act, a franchisee cannot waive any rights or release the franchisor of any obligations under the Act.
Generating opportunities in Saskatchewan
The introduction of this new franchising legislation may be attractive for prospective franchisors considering Saskatchewan as it introduces the benefits of clarity, protection, and fairness in the provincial operating environment.
The Act aims to “level the playing field” between franchisors and franchisees, addressing the often imbalanced negotiation dynamics of franchise agreement terms. Specifically, the legislation places a heavy emphasis on disclosure by requiring franchisors to provide a disclosure document containing all material facts, copies of relevant agreements, along with any additional information to be prescribed by the regulations. Following such disclosure and prior to signing the franchise agreement, any material changes are to be reported to the franchisee in writing as soon as practicable. By ensuring adequate disclosure at the outset, a franchisee is equipped to make well-informed decisions about the business, which in turn helps foster transparent business relationships and mitigates the risks for all parties involved.
For business owners who already operate or are looking to operate a franchise in Saskatchewan, having a clear legal framework outlining the obligations of each party and providing legal remedies where parties are non-compliant with the Act aids in instilling greater confidence in the franchise environment. This new legislation would introduce a regime similar to those already established in British Columbia, Alberta, Manitoba, Ontario and Prince Edward Island. As a result, franchisors already operating in any of these Canadian provinces can anticipate lower additional costs and similar obligations when expanding their franchise into Saskatchewan.
Conclusion
A date has not yet been set by the Lieutenant Governor in Council for when the Act will come into force, however, the speed with which Bill 149 has progressed through its three readings and received Royal Assent could indicate that this legislation might come into force this year. Miller Thomson continues to monitor the progress of the Act. Do not hesitate to contact the authors should you have any questions regarding the Act or doing business in Saskatchewan generally.
