December 16, 2016
As we enter the home stretch of 2016, there are a number of significant legal developments to be aware of which will impact the Canadian franchise industry, either to close out the year, enter the new one or to simply be on your radar for now.
Quebec’s signage laws – as of November 24, 2016, Quebec’s Regulation respecting the language of commerce and business will be amended to require that all storefront and rooftop meet certain French display requirements. It is established law that all signs must be in French in Quebec, but there is an exemption if you have a trademark that is registered in English only with the Canadian Intellectual Property Office, in that the trademark itself does not need to be translated into French. In these cases, the amended laws will mandate new visibility requirements, so that if you can see the English words from a particular viewpoint (a street corner, passing by on the highway), you must also be able to see the French words. There will be a 3-year grace period to comply with the new law.
Ontario’s menu laws – effective January 1, 2016, Ontario’s Healthy Menu Choices Act will come into effect, meaning that all food service premises with 20 or more outlets in Ontario will need to post and display the number of calories of each standard food and beverage item. This law will not apply to restaurant chains only, but also to hotels, movie theatres, grocery stores, convenience stores and other venues which satisfy the legislative criteria. Under the Healthy Menu Choices Act, caloric content of each menu item will need to be displayed wherever the food is itself displayed, including menu boards, take-out or eat-in menus and some advertisements. One of the flaws in the legislation is that franchisors can be found liable for instances when their franchisees are offside of it. This means that franchisors will have to be more proactive (if they are not already) in ensuring complete or near-complete control over the individual ingredients that franchisees purchase so that the caloric content does not deviate from the testing and analysis the franchisor has conducted. It also means that franchisors should educate their franchisees on legal compliance as well as the food products themselves. Costs will be incurred with respect to food testing, developing new menu boards and creating and implementing all new menu and display items.
B.C.’s franchise laws – as of February 1, 2017, British Columbia will join Ontario, Alberta, Manitoba, Prince Edward Island and New Brunswick to become the sixth province to enact franchise laws. B.C.’s Franchises Act largely mirrors the other provinces’ statutes, including the requirement that a franchisor provide a prospective franchisee with a franchise disclosure document at least 14 days prior to the franchisee signing any agreement relating to the franchise or paying anything to the franchisor. The law will also contain the same statutory rights as other provinces’, including a franchisee right of association, and a duty for franchisors and franchisees to act in good faith and in accordance with commercially reasonable standards when dealing with one another. B.C.’s content requirements for the actual disclosure document are generally consistent with the other provincial standards, but there are a handful of notable and technical differences. So the big takeaway for franchisors doing business in B.C., or contemplating doing business in B.C. after February 1, 2017 is to make sure your disclosure document is updated for use and compliance within that province.
Ontario’s employment laws – as I previously detailed, Ontario is considering major amendments to its employment legislation, including the possibility of deeming franchisors to be the joint employers of their franchisees’ employees. Exposing franchisors to this degree of liability, and the resulting effect it would have on franchisee relations, seems to defeat the very purpose of using the franchise business model, and could have a significant impact on the franchise industry generally. It is too early to speculate on what the outcome of this review will be.
Canada’s trademark laws – finally, as a result of the free trade agreement recently negotiated between Canada and the European Union, Canada’s intellectual property regime is getting a bit of an overhaul. This includes eliminating the current legal requirement that in order to get a trademark registered in Canada, you actually have to use it. Once this law comes into force at some point in 2018, bad actors may seek to get trademarks registered that they have no intention of ever using, but that they can hold from you at ransom. As a result, brand owners around the globe are giving thought to how to apply for and register the most robust trademark portfolio as possible, including applying for marks which they may use in the future, to mitigate against this risk.
As you can see, with legal developments constantly evolving, it is never a dull moment for the franchise industry in Canada.