The business was unsuccessful. The plaintiffs sued the defendant, claiming that the relationship was actually a “franchise”, due to the definition of a “franchise” in the Arthur Wishart Act (Franchise Disclosure), 2000. The plaintiffs sought rescission on the basis that no disclosure document was provided by the defendant to the plaintiff, as required by the legislation, prior to entering into the agreement. The defendant took the position that no disclosure document was required because the relationship was not a franchise and the legislation did not apply. The court found that the three key elements of a “franchise”, as defined in the legislation, were present, and the business opportunity was a franchise. These are (i) a payment, (ii) substantial association with a trade-mark, and (iii) significant control or assistance offered or exercised over the plaintiff by the defendant. Because no disclosure document was provided, the court allowed the plaintiff to rescind the agreement, and awarded the plaintiff significant damages.
Dominic Mochrie, IDI country expert for franchising in Canada.