Full Case Name: Ahmed v. 3 for 1 Pizza & Wings (Canada) Inc. (2004)
This court decision was among the earliest reported franchise disclosure decisions after the passage of Ontario’s franchise legislation, the Arthur Wishart Act (Franchise Disclosure), 2000.
It was the first Ontario decision that defined the term “franchise agreement” to include an agreement between a sub-franchisor and a sub-franchisee, requiring the delivery of a disclosure document.
The franchisor attempted to circumvent the disclosure requirements under the Act by structuring the arrangement as a “management agreement” (rather than a franchise agreement) with a “manager” (rather than a franchisee).
The Ontario Superior Court of Justice held that the so-called “management agreement” contained the components of a franchise relationship under the Act, and that therefore it was a “franchise agreement” under the definition of the Act; and the “manager” was a “franchisee” under the Act.
As a result, the court held that the franchisor failed to provide to the franchisee a disclosure document, entitling the franchisee to a rescission of the arrangement and compensation for all his losses.
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