12 | LEXPERT • June 2017 | www.lexpert.ca/usguide-corporate/
FRANCHISORS in the US might reason-
ably assume that, because of the proximity of
Canada and the similarities in our culture, less
research is needed than if they were moving
to a faraway country. Forgoing the same level
of research may be especially tempting for
the franchisors that have invested a signifi-
cant amount of money into US disclosure
documents and processes, "but they can't,"
says Ned Levitt of Dickinson Wright LLP in
Toronto. "Just because we are so much alike doesn't mean we're dealing with the same issues."
For starters, Canada's 10 provinces and territories present variations in governing legislation and
regulation. Six provinces — BC, Alberta, Manitoba, Ontario, Prince Edward Island and New Bruns-
wick — each have their own franchise-specific statutes. And so simply resorting to the "wraparound"
business and disclosure model that is prevalent in the United States is a dangerous proposition, Levitt
says. "We recommend they do proper Canadian disclosure from square one — one that complies with
all provinces — if there is an issue around compliance, and it's an early issue that in-house counsel re-
ally wants to understand because they're going to have to make some decisions about how to proceed."
US in-house counsel, even when they hire Canadian law firms to do the Canadian work, really have
to adjust, he says. For example, in both the US and Canada, where they have to put the cost of estab-
lishing a franchise in the disclosure agreement, "I can't tell you the number of times I get a US fran-
chiser coming into Canada with numbers that are perfectly valid in the US but not valid in Canada."
The cost of square footage and labor in Minneapolis may be nothing like the cost in Montréal and,
if they just use the US number, warns Levitt, "they will have [inadvertently] provided a defective dis-
closure document that will at least give the franchisee a remedy of a 60-day rescission and possibly as
much as two years and possibly damages as well."
FRANCHISE LAW
PHOTO:
SHUTTERSTOCK
Cross-border
FRANCHISING
US franchisors moving
into Canada face challenges,
including language, disclosure
and provincial statutes, as well
as a recent court decision
expanding the interpretation
of what it means to be a 'party'
to a franchise agreement
BY SANDRA RUBIN
