The new Franchises Act and regulations, which come into force on Feb. 1, 2017, will help ensure that a prospective entrepreneur who wants to open a franchise in British Columbia has the information and support needed to make an informed decision about whether to invest in the franchised business.
The new legislation will provide important legal protections for British Columbia-based franchisees who operate a franchise. This includes regulating the sale of franchises, requiring that contracts include pre-sale disclosure requirements, and providing more legal rights and protections to help parties resolve disputes. The legislation will provide certainty for franchised businesses, a move the Province hopes will encourage franchising efforts in B.C., generating investment and employment opportunities as well as providing direct and indirect economic benefits to the communities in which they operate.
The act will also increase transparency for new franchisees, requiring franchisors to disclose all information that will significantly affect the franchisee’s decision to purchase the franchise, including background information on legal, financial and bankruptcy history.
The Franchises Act and regulations were developed with input from key stakeholders throughout the province ensuring it meets the specific needs of franchisees and franchisors in British Columbia, while aligning B.C.’s laws with the five other provinces with franchise regulations (Alberta, Manitoba, Ontario, New Brunswick and Prince Edward Island) to reduce red tape and bring consistency for franchisors across Canada.
To help with the transition to the new franchise legislation, the Province has created resource materials to help educate franchisees and franchisors. These materials will be available in four languages: Chinese (simplified and traditional), Punjabi and Korean:
- A checklist with a high-level overview of steps required to enter into a franchise agreement;
- A ‘questions to ask’ sheet prompting franchisees to seek specific information during discussions with franchisors;
- An easy-to-read summary of the key points of the new Franchises Act.
Coralee Oakes, Minister of Small Business and Red Tape Reduction –
“The new Franchises Act will provide franchisees with the information and protection that they need to operate their business, while creating business certainty for franchisors. By cutting red tape and bringing our regulations in line with other provinces, we are continuing to encourage investment in franchises and drive economic growth in B.C.”
Natacha V Beim, founder and CEO of CEFA Early Learning –
“With the newly legislated Franchise Act, local B.C.-based businesses will find it easier to grow, expand, and reach new heights to serve Canadian families, while the education materials will make learning the rules accessible for all British Columbians interested in becoming franchise owners.”
Kathleen Cunningham, executive director of BC Law Institute –
“We are tremendously pleased to see the Franchises Act and regulations being brought into force next year. The act reflects best practices that have legal effect already in much of Canada, protects franchisees and also benefits franchisors by providing needed certainty. The resource material which the Province is making available should help prospective franchisees to learn how the legislation protects them and what information they should receive in order to make an informed investment decision.”
- The Franchises Act was first introduced in the legislature in October 2015 to increase transparency in B.C.’s franchise industry.
- A franchise is a business in which one party (the franchisor) grants to the other party (the franchisee), the right to market goods or services under the franchisor’s business system or trade name, in return for fees and royalties.
- Commonly franchised businesses include restaurants, oil change businesses, coffee shops, hotels and cleaning services.
- This legislation aims to make investing in B.C. even easier and to protect British Columbians who are buying into a franchised business.
- There are nearly 78,000 franchised outlets in Canada with $100 billion in annual sales, and Canadian franchises employ about 1.5 million people – one in every 22 in Canada.
Starting a Franchise in B.C.: http://ow.ly/GiJr304OPKj
Franchisee Checklist: http://ow.ly/v4tA304OPMG
Franchises Act Questions & Answers: http://ow.ly/fVV7304OPRF
Franchisee Questions to Ask: http://ow.ly/FNqx304OPWA
A backgrounder follows.