Franchise & Distribution: 2014 Year in Review

McCarthy Tétrault’s Franchise & Distribution Group is pleased to provide our 2014 Year in Review, gathering articles written by our lawyers in the past year discussing developments in the law that may be of interest to franchise businesses. More information about McCarthy Tétrault’s Franchise & Distribution Group is available here.

Legal Risk Management in Franchise System Change
By: Adam Ship, Thomas N.T. Sutton, Katie Szilagyi on January 14, 2014

As a matter of competitive necessity, franchisors must continually evolve and adapt their products, services and internal operations. However, given the risk of litigation and indeed class actions from franchisees and dealers who may be negatively affected, franchise system change must be managed with special care. In a recent article published in the Ontario Bar Association’s Focus on Franchising, members of McCarthy Tétrault’s Franchise & Distribution Group have reviewed the legal trends that emerge from the franchise system change case law in Canada and distill several risk management strategies. The authors reach three key conclusions in the article … → Continue Reading

Franchisors Must Repurchase Damaged Equipment From Franchisees Upon Rescission
By Brooke MacKenzie and Adam Ship on February 4, 2014

In the latest installment of the Springdale Pizza Depot franchise dispute, the Ontario Superior Court of Justice clarified that, upon rescission, franchisors must buy back supplies and equipment purchased by the franchisee pursuant to the franchise agreement – even if the equipment is in very poor condition.
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Drafting General Release Clauses in Franchise Agreements: A Cautionary Tale From the Ontario Superior Court of Justice
By Christopher Kalantzis, Brooke MacKenzie,Tyler McAuley, Adam Ship and Thomas N.T. Sutton on February 10, 2014

The Ontario Superior Court of Justice recently struck down a general release clause in a franchise agreement, even though the franchisor only sought a release with respect to non-statutory claims. The case provides important guidance regarding how to draft a release that will withstand scrutiny under section 11 of the Arthur Wishart Act (Franchise Disclosure) and the parallel provisions in the franchise legislation in Alberta, Manitoba, New Brunswick and P.E.I. → Continue Reading

A Commentary on a Recent Legal Development in Ontario’s Franchise Legislation
By Hovsep Afarian on March 13, 2014

The Supreme Court of Canada denied leave to appeal this week in one case of interest to Canadian businesses.
In Springdale Pizza Depot Ltd. et al v. 2189205 Ontario Inc. et al, the Supreme Court of Canada declined to grant leave to appeal from an Ontario Court of Appeal decision which addressed the availability of the right of set-off in the context of a statutory right of rescission in Ontario’s … → Continue Reading

B.C. Even Closer to Enacting Franchise Legislation
By Jordanna Cytrynbaum, Miriam Isman and Adam Ship on April 3, 2014

British Columbia has no special franchise legislation – franchise relationships are governed by the terms of franchise agreements and the common law of contracts. However, a new report reveals that interested parties are largely in favour of changing this regime through the introduction of franchise legislation. This consensus became clear after a year of consultations and studies by the British Columbia Law Institute, which has now recommended the introduction of franchise legislation to the B.C. Legislature … → Continue Reading

Canadian Franchise Association 2014 National Convention – April 6-8, 2014 in Niagara Falls, Ontario
By Helen Fotinos, Adam Ship, Tyler McAuley, Anne-Marie Naud and Ian Bies on April 11, 2014


The Canadian Franchise Association (CFA) held its 23rd Annual National Convention this week from April 6-8 in Niagara Falls, Ontario. A number of members from the McCarthy Tétrault Franchise & Distribution Group attended the convention. → Continue Reading

Ontario Court Finds That Material Omission in Franchise Disclosure Document Provides Only 60-Day Rescission Right
By Sarit Batner, Helen Fotinos, Brooke MacKenzie and Adam Ship on April 24, 2014

In a significant recent decision, the Ontario Superior Court of Justice granted partial summary judgment in Caffé Demetre v. 2249027 Ontario Inc. the first franchise rescission claim to be decided since the new summary judgment test was set down by the Supreme Court of Canada in Hryniak v. Mauldin. The case is one of the first in which an Ontario court … → Continue Reading

Ontario Court Declares That Bare Trademark License Agreement Is Not Subject to Franchise Disclosure Legislation
By Helen Fotinos, Brooke MacKenzie, Catherine M. Samuel and Adam Ship on August 19, 2014

A recent decision of the Ontario Superior Court of Justice found that a bare trademark license agreement was not subject to Ontario’s franchise legislation. The decision provides guidance to companies that wish to avoid the application of Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 when licensing their trademarks … → Continue Reading

Ontario Court Certifies Franchise Encroachment Claim as Class Action
By Sarit Batner, Helen Fotinos, Thomas N.T. Sutton, Adam Ship and Tyler Wentzell on September 15, 2014

The Ontario Superior Court of Justice recently certified a class action by dealers of a home furnishings company in 1291079 Ontario Limited v. Sears Canada Inc.
The dealers are outlet stores for a national department store (the putative franchisor) and allege that they are “franchisees” within the meaning of Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 ... → Continue Reading

Update on BC Franchise Legislation – BC Government Asks for Submissions from Stakeholders
By Jordanna Cytrynbaum, Helen Fotinos, Miriam Isman and Adam Ship on September 15, 2014

Earlier this year, the British Columbia Law Institute (BCLI) published a Report on a Franchise Act for British Columbia and recommended the implementation of franchise disclosure legislation in B.C., similar in structure to the legislation in force in Ontario, Alberta, Manitoba, New Brunswick and PEI. → Continue Reading

Ontario Superior Court Refunds Franchise Fee on the Basis of Frustration of Contract
By Brooke MacKenzie, Adam Ship and Thomas N.T. Sutton on October 15, 2014

The Ontario Superior Court recently affirmed a Small Claims Court decision returning a franchise fee to a franchisee where the franchise location contemplated was no longer available – in spite of a clause in the franchise agreement stating that the franchise fee “is under no circumstances refundable”. Interestingly, the decision is based on the common law doctrine of frustration of contract, without reference to franchise disclosure legislation. → Continue Reading

Balancing The Risk Of Vicarious Liability With The Need To Control and Protect Your Brand
By Adam Ship, Miriam Isman, Jordanna Cytrynbaum and Katherine Booth on November 13, 2014

One of the defining features of the franchise business model is the formal, legal separation between the franchisor and its franchisees, but this formal separation will not always guarantee that the franchisor is protected from legal liability for the acts and omissions of its franchisees. Two recent developments in the U.S. have brought this topic of franchisor liability (or vicarious liability) into the headlines, and serve as an important reminder to franchisors regarding … → Continue Reading

Ontario Court Substantially Dismisses Franchise Class Action Regarding Passing On of Volume Rebates
By Brooke MacKenzie, Adam Ship and Thomas N.T. Sutton on November 20, 2014

A recent decision of the Ontario Superior Court, which resolved numerous common issues in a franchise class action on summary judgment, provides practical guidance to franchisors on how to reduce legal risk relating to the sharing of volume discounts or other pricing benefits with franchisees. → Continue Reading

Ontario Court Rejects Franchise Class Action Settlement Agreement for Overbroad Release
By Chantal Tremblay, Jill Yates and Adam Ship on November 25, 2014

In 2038724 Ontario Ltd. v. Quizno’s Canada Restaurant Corporation, the Ontario Superior Court of Justice recently dismissed a motion to approve a Settlement Agreement between the Franchisor and the Representative Franchisees on the basis of an overbroad unfair release. → Continue Reading

Holiday Shopping Season – Steps Companies Can Take to Protect Themselves From Data Breaches
By McCarthy Tétrault LLP on November 28, 2014

As the online holiday shopping season kicks off with Cyber Monday, companies must be prepared for the risks posed by hackers. December may be the most hackable month of the year but retailers can incorporate the following practical steps, outlined by Kirsten Thompson from our firm’s Technology blog, to protect themselves from these risks … → Continue Reading

Industry Minister Targets Retail Sales With New Cross Border Price Discrimination Law
By Oliver J. Borgers and Michele Siu on December 9, 2014

Today, Industry Minister James Moore announced that new legislation, the “Price Transparency Act”, will be tabled in Parliament to target “unjustified” cross-border price discrimination. Minister Moore indicated that the legislation will ensure that Canadians pay “comparable prices for comparable goods”. The new law is not intended to set or regulate prices in Canada, nor does it appear that penalties can be imposed. Instead, the Commissioner of Competition will be given powers and tools to investigate and “expose” price gaps between U.S. and Canadian retailers, though the Minister noted that some higher prices are justified by legitimate higher costs of doing business on this side of the border. → Continue Reading