The recent amendments to the Arthur Wishart Act (Franchise Disclosure), 2000 (the AWA) include additional flexibility for pre-disclosure contracting, and clarity for various exemptions from the disclosure requirement. However, while the language in some of the amendments now aligns the AWA with other provincial legislation, franchisors should be aware of some potential interpretational issues when relying on them. This article provides an overview of some of these potential issues which, if not managed, could put the franchisor in a worse position had they not relied on the amendments in the first place.
Exemption from the obligation to disclose for confidentiality and site-selection agreements
Section 5(1)(a) of the AWA requires that a franchisor provide a prospective franchisee with a disclosure document not less than 14 days before the prospective franchisee signs a franchise agreement or any agreement relating to the franchise. The AWA’s broad definition of “franchise agreement,” would include confidentiality agreements and site-selection agreements. Accordingly, this section has prevented franchisors from requiring prospective franchisees to sign confidentiality agreements to protect the franchisor’s confidential information that must be shared with a prospective franchisee via a disclosure document, during pre-contractual discussions, or to settle on a specific site for the franchise. Notably, the inability to put a “hold” on a specific site for the franchise was likely equally frustrating to franchisees as it was for the franchisor.
The amendments now permit the execution of either or both of a confidentiality agreement and a site-selection agreement during or before the 14-day disclosure period. However, the agreements must meet certain criteria: They must only contain terms that, as applicable:
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