A franchise disclosure document is intended help franchisees make informed investment decisions about buying a franchise.
Prospective franchisees should be comforted by the legislation in Ontario, Alberta, New Brunswick, Prince Edward Island and Manitoba that recognizes the inherent imbalance of power in the franchisor-franchisee relationship, and tries to address that by giving franchisees certain rights.
But the legislation in those provinces is far from perfect. Ontarioâ€™s franchise statute is only 12 years old, and is already antiquated in the face of business realities, or so ambiguous in its language that franchise lawyers can have a field day interpreting its meaning, typically at the considerable expense of their entrepreneurial clients.
One of the complaints I hear most often from franchisors is that they are not permitted to require a franchisee to sign a non-disclosure agreement until at least 14 days after the franchisee received the disclosure document. Continue reading.