Franchise Disputes

The franchisor required that the franchisee purchase a store through a conventional purchase and sale agreement before entering into a franchise agreement. By structuring the transaction this way, the franchisor attempted to circumvent the disclosure requirements that the Act imposes on franchisors. This court decision was among the earliest reported franchise disclosure decisions under the Arthur Wishart Act (Franchise Disclosure), 2000.

This court decision is among the most influential Ontario Superior Court decisions to date under the Arthur Wishart Act (Franchise Disclosure), 2000, on the issue of releases and waivers of statutory franchise rights.

Ben Hanuka represented a group of approximately 200 franchisees in a class action suit against Quiznos after they signed a franchise agreement but never received a location for their restaurant. Quiznos did not finalize details about the lease and construction requirements of the location and the franchise agreement and related franchise document contained conflicting information. This was the first Ontario class action based on the disclosure requirements in the Arthur Wishart Act (Franchise Disclosure), 2000. The class action resulted in a settlement of partial refunds of the franchise fee to different groups of the class members.

The disclosure document did not contain key required components under the Arthur Wishart Act (Franchise Disclosure), 2000. The franchisee brought a court action to cancel (rescind) the franchise purchase and receive compensation. This is an influential Ontario court decision under the Arthur Wishart Act (Franchise Disclosure), 2000.

Franchisees renewed the franchise agreement, unaware that the landlord and Country Style were involved in a significant dispute about the renewal of the head lease, and that Country Style had agreed with the landlord to terminate the lease. This is an influential Ontario court decision under the Arthur Wishart Act (Franchise Disclosure), 2000.

Law Works represented the franchisor in this case in a dispute with its franchisee. The franchisor took the position that the arbitration provisions in the franchise agreement applied and that the franchise dispute had to be arbitrated outside of court. The court ruled that the arbitration agreement did not apply because other parties were involved in the dispute, i.e., the individual principals of the franchisee and affiliates of the franchisor, who were not signatories to the arbitration agreement.

This is a frequently cited decision of the Court of Appeal for Ontario, which reversed the decision of the motion judge and granted summary judgment for rescission in favour of the franchisee. There were significant disclosure deficiencies in the franchise disclosure document, including stale-dated financial statements of the franchisor, required signatures of the franchisor’s officers and directors, and piecemeal disclosure. This decision is also the first Court of Appeal decision expressly holding that the test for a franchisor’s compliance with its disclosure obligations under the Arthur Wishart Act (Franchise Disclosure), 2000, is objective; that the focus is on the nature of the deficiency and its impact on the disclosure requirements on a reasonable (not subjective) standard.

The Ontario Superior Court granted rescission to the franchisee under the Arthur Wishart Act (Franchise Disclosure), 2000, on the basis that the franchisor provided projections in the franchise disclosure document without disclosing the basis for them and other information required under the Wishart Act, as well as for delivering the disclosure document in in piecemeal.

Law Works represented the franchisor in this case, defending against a rescission claim brought by a franchisee. The Ontario Superior Court granted judgment for rescission to the franchisee against the franchisor and the franchisor’s associates on the basis that the franchisor’s certificate in the franchise disclosure document did not contain the required signature of the franchisor’s officer and director, and that another section in the franchise disclosure document, signed by the franchisor, contained misrepresentations.