17 Limit
on jurisdictional choice
18 Waiver
of rights
19 Burden
of proof
General Regulations
20 Regulations
Self‑government
21 Self‑government
Transitional
Provisions
22 Transitional
HER MAJESTY, by and with
the advice and consent of the Legislative Assembly of Alberta, enacts as
follows:
Interpretation
1(1) In this Act,
(a) “disclosure
document” means a disclosure document required to be given under section 4 and
includes any changes required to be given under section 4(4);
(b) “former
Act” means the Franchises Act, RSA
1980 cF‑17, as it read immediately before October 31, 1995;
(c) “fractional
franchise” means a franchise granted to a person to sell goods or services
within a business in which that person has an interest, the sales arising from
which, as anticipated by the parties or that should be anticipated by the
parties at the time the franchise is entered into, do not exceed, in relation
to the total sales of the business, the percentage prescribed by the
regulations;
(d) “franchise”
means a right to engage in a business
(i) in which goods or services are sold or offered for sale or are
distributed under a marketing or business plan prescribed in substantial part
by the franchisor or its associate,
(ii) that is substantially associated with a trademark, service mark,
trade name, logotype or advertising of the franchisor or its associate or
designating the franchisor or its associate, and
(iii) that involves
(A) a continuing financial obligation to the
franchisor or its associate by the franchisee and significant continuing
operational controls by the franchisor or its associate on the operations of
the franchised business, or
(B) the payment of a franchise fee,
and includes a master
franchise and a subfranchise;
(e) “franchise
agreement” means any agreement that relates to a franchise between
(i) a franchisor or its associate, and
(ii) a franchisee or prospective franchisee;
(f) “franchise
fee” means a direct or indirect payment to purchase a franchise or to operate a
franchised business, but does not include
(i) a purchase of or an agreement to purchase a reasonable amount of
goods at a reasonable bona fide wholesale price,
(ii) a purchase of or an agreement to purchase a reasonable amount of
services at a reasonable bona fide price, or
(iii) a payment of a reasonable service charge to the issuer of a
credit or debit card by an establishment accepting the credit or debit card, as
the case may be;
(g) “franchise
system” includes
(i) the marketing or business plan of the franchise,
(ii) the use of or association with a trademark, service mark, trade
name, logotype or advertising,
(iii) the obligations of the franchisor and franchisee with regard to
the operation of the franchised business, and
(iv) the goodwill associated with the franchise;
(h) “franchised
business” means a business operating under a franchise agreement;
(i) “franchisee”
means a person to whom a franchise is granted and includes
(i) a subfranchisor with regard to that subfranchisor’s relationship
with a franchisor, and
(ii) a subfranchisee with regard to that subfranchisee’s relationship
with a subfranchisor;
(j) “franchisor”
means one or more persons who grant a franchise and includes a subfranchisor
with regard to its relationship with a subfranchisee;
(k) “interest
in a franchise” includes the ownership of shares in the corporation that owns
the franchise;
(l) “marketing
or business plan” means a plan or system that specifies a material aspect of
conducting business, including, without limitation, any one or more of the
following:
(i) price specification, special pricing systems or discount plans;
(ii) sales or display equipment or merchandising devices;
(iii) equipment to be used to perform services;
(iv) sales techniques;
(v) promotional or advertising materials or co‑operative
advertising;
(vi) training relating to the promotion, operation or management of
the business;
(vii) operational, managerial, technical or financial guidelines or
assistance;
(m) “master
franchise” means the right granted by a franchisor to a subfranchisor to sell
or offer franchises for the subfranchisor’s own account;
(n) “material
change” means
(i) a change in the business, operations, capital or control of the
franchisor or its associate, or
(ii) a change in the franchise system,
that would reasonably be
expected to have a significant adverse effect on the value or price of the
franchise to be sold or the decision to purchase the franchise and includes a
decision to implement the change made by the board of directors of the
franchisor or its associate or by senior management of the franchisor or its
associate who believe that confirmation of the decision by the board of
directors is probable;
(o) “material
fact” means any information about the business, operations, capital or control
of the franchisor or its associate, or about the franchise system, that would
reasonably be expected to have a significant effect on the value or price of
the franchise to be sold or the decision to purchase the franchise;
(p) “Minister”
means the Minister determined under section 16 of the Government Organization Act as the Minister responsible for this
Act;
(q) “misrepresentation”
includes
(i) an untrue statement of a material fact,
(ii) an omission to state a material fact that is required to be
stated, or
(iii) an omission to state a material fact that needs to be stated in
order for a statement not to be misleading;
(r) “officer”
means
(i) the chair or vice‑chair of the board of directors or the
president, vice‑president, secretary, assistant secretary, comptroller,
assistant comptroller, treasurer, assistant treasurer or general manager of a
corporation,
(ii) any individual who performs functions or acts in a capacity
similar to the functions or capacities referred to in subclause (i), or
(iii) any individual designated as an officer of a corporation by bylaw
or similar authority of the corporation;
(s) “person”
means an individual, partnership, corporation, unincorporated association,
unincorporated organization, trustee, executor, administrator or other legal
representative;
(t) “sell”
means a sale or a disposition of a franchise or an interest in a franchise;
(u) “subfranchise”
means a franchise granted by a subfranchisor to a subfranchisee;
(v) “subfranchisee”
means a person to whom a subfranchise is granted by a subfranchisor;
(w) “subfranchisor”
means one or more persons who grant a subfranchise and includes a person to
whom a master franchise is granted.
(2) A
person is an associate of a franchisor if the person is directly involved in
the granting of the franchise or if there are continuing financial obligations
by the franchisee to that person and significant operational controls by that
person on the franchisee and
(a) the
person controls the franchisor,
(b) the
person is controlled by the franchisor, or
(c) the
person and the franchisor are under the common control of another person.
(3) A
corporation is controlled by another person if
(a) the
voting securities of the corporation carrying more than 50% of the votes that
may be cast to elect directors are held, other than for the purpose of
collateral for a debt, by or for the benefit of the other person, and
(b) the votes carried by the securities referred
to in clause (a) are sufficient, if exercised, to elect a majority of the board
of directors of the corporation.
1995 cF‑17.1 s1
Purpose and Application
Purpose statement
2 The purpose of this Act is
(a) to
assist prospective franchisees in making informed investment decisions by
requiring the timely disclosure of necessary information,
(b) to
provide civil remedies to deal with breaches of this Act, and
(c) to provide a means by which franchisors and
franchisees will be able to govern themselves and promote fair dealing among
themselves.
1995 cF‑17.1 s2
Application of Act
3(1) This Act applies to the sale of a franchise
made on or after November 1, 1995
(a) if
the franchised business is to be operated either partly or wholly in Alberta,
and
(b) if
the purchaser of the franchise is an Alberta resident or has a permanent
establishment in Alberta for the purposes of the Alberta Corporate Tax Act.
(2) Sections
5(1)(d) and (f), 6, 7, 8, 11, 15, 20 and 21 apply to the sale of a franchise
made before November 1, 1995
(a) if
the franchised business is operating or is to be operated either partly or
wholly in Alberta, and
(b) if, on November 1, 1995, the franchisee is
an Alberta resident or has a permanent establishment in Alberta for the
purposes of the Alberta Corporate Tax Act.
1995 cF‑17.1 s3
Disclosure Document
Giving of document
to franchisee
4(1) A franchisor must give every prospective
franchisee a copy of the franchisor’s disclosure document.
(2) The
disclosure document must be received by the prospective franchisee at least 14
days before
(a) the
signing by the prospective franchisee of any agreement relating to the
franchise, or
(b) the
payment of any consideration by the prospective franchisee relating to the
franchise,
whichever is earlier.
(3) A
disclosure document must
(a) comply
with the requirements of the regulations,
(b) contain
copies of all proposed franchise agreements, and
(c) contain
financial statements, reports and other documents in accordance with the
regulations.
(4) The
franchisor must provide, in writing, to the prospective franchisee a
description of any material change.
(5) The
prospective franchisee must receive the description of the material change as
soon as practicable after the change has occurred and before
(a) the
signing by the prospective franchisee of any agreement relating to the
franchise, or
(b) the
payment of any consideration by the prospective franchisee relating to the
franchise,
whichever is earlier.
(6) For
the purposes of subsections (2)(b) and (5)(b), the payment of any consideration
relating to a franchise does not include the payment of a fully refundable
deposit.
(7) For
the purposes of subsections (2)(a) and (5)(a), an agreement that contains only
terms and conditions relating to any one or more of the following is not a
franchise agreement:
(a) a
fully refundable deposit;
(b) the
keeping confidential or prohibiting the use of any information or material that
may be provided to the prospective franchisee;
(c) the
designation of a location or territory of the prospective franchised business.
(8) For the purposes of this section, a fully
refundable deposit is a deposit that does not exceed the amount prescribed by
the regulations, that is refundable without any deductions and that is given
under an agreement that in no way binds the prospective franchisee to enter
into any franchise agreement.
1995 cF‑17.1 s4
Exemptions
Statutory exemptions
5(1) The following are exempt from section 4:
(a) the
sale of a franchise by a franchisee if
(i) the franchisee is not the franchisor or an associate of the
franchisor or a director, officer or employee of the franchisor or its
associate,
(ii) the sale is for the franchisee’s own account,
(iii) in the case of a master franchise, the entire franchise is sold,
and
(iv) the sale is not effected by or through the franchisor;
(b) the
sale of a franchise to a person who has been an officer or director of the
franchisor or its associate for at least 6 months for that person’s own
account;
(c) the
sale of an additional franchise to an existing franchisee if that additional
franchise is substantially the same as the existing franchise that the
franchisee is operating;
(d) a
renewal or extension of an existing franchise agreement;
(e) the
sale of a franchise if the franchisee is required to make a total annual
investment to acquire and operate the franchise in an amount that does not
exceed the amount prescribed by the regulations;
(f) the
sale of a franchise by an executor, administrator, sheriff, receiver, trustee,
trustee in bankruptcy or guardian on behalf of a person other than the
franchisor or the estate of the franchisor;
(g) the
sale of a right to a person to sell goods or services within or adjacent to a
retail establishment as a department or division of the establishment, if the
person is not required to purchase goods or services from the operator of the
retail establishment;
(h) the
sale of a fractional franchise.
(2) For
the purpose of subsection (1)(a)(iv), a sale is not effected by or through a
franchisor merely because the franchisor
(a) has
a reasonable right to approve or disapprove the sale, or
(b) requires
payment of a transfer fee
(i) the specific amount of which is established in the franchise
agreement, or
(ii) that does not exceed the reasonable actual
costs incurred by the franchisor to process the transfer.
1995 cF‑17.1 s5
Further exemptions
6(1) The Minister may by regulation, if the
Minister, after consultation with the body designated under section 21(1), is
satisfied that to do so would not be prejudicial to the public interest, exempt
(a) any
person or class of persons,
(b) any
sale of a franchise or any class of sale of a franchise, or
(c) any
franchise or class of franchise
from any or all
provisions of this Act or the regulations, subject to any terms and conditions
that the Minister considers appropriate.
(2) A regulation under subsection (1) may come into
force on a date prior to the date on which the regulation is made.
1995 cF‑17.1 s6
Fair Dealing
Fair dealing
7 Every franchise agreement
imposes on each party a duty of fair dealing in its performance and
enforcement.
1995 cF‑17.1 s7
Right to Associate
Franchisee’s right to associate
8(1) A franchisor or its associate must not prohibit
or restrict a franchisee from forming an organization of franchisees or from
associating with other franchisees in any organization of franchisees.
(2) A franchisor or its associate must not directly
or indirectly penalize a franchisee for engaging in the activities described in
subsection (1).
1995 cF‑17.1 s8
Damages, Cancellation and
Other Rights and Remedies
Misrepresentation in
disclosure document
9(1) If a franchisee suffers a loss because of a
misrepresentation contained in a disclosure document, the franchisee has a
right of action for damages against any or all of the following:
(a) the
franchisor;
(b) every
person who signed the disclosure document.
(2) If a disclosure document contains a
misrepresentation, a franchisee who purchases a franchise to which the
disclosure document relates is deemed to have relied on the misrepresentation.
1995 cF‑17.1 s9
Defence to liability
10(1) A person is not liable in an action under
section 9 if the person proves that the franchisee purchased the franchise with
knowledge of the misrepresentation.
(2) A
person other than the franchisor is not liable in an action under section 9 if
the person proves
(a) that
the disclosure document was given without the person’s knowledge or consent and
that on becoming aware of its having been given the person promptly gave notice
as prescribed by the regulations that it was given without that person’s
knowledge and consent,
(b) that,
after the giving of the disclosure document and before the purchase of the
franchise by the franchisee, on becoming aware of any misrepresentation in the
disclosure document the person withdrew consent to it and gave notice as
prescribed by the regulations of the withdrawal and the reasons for it,
(c) that,
with respect to any part of the disclosure document purporting to be made on
the authority of an expert or purporting to be a copy of or an extract from a
report, opinion or statement of an expert, the person had no reasonable grounds
to believe and did not believe that
(i) there was a misrepresentation,
(ii) the part of the disclosure document did not fairly represent the
report, opinion or statement of the expert, or
(iii) the part of the disclosure document was not a fair copy of or
extract from the report, opinion or statement of the expert,
or
(d) that,
with respect to a false statement purporting to be a statement made by an
official person or contained in what purports to be a copy of or extract from a
public official document,
(i) it was a correct and fair representation of the statement or a
copy of or extract from the document, and
(ii) the person had reasonable grounds to believe and did believe that
the statement was true.
(3) A
person other than the franchisor is not liable in an action under section 9
with respect to any part of the disclosure document not purporting to be made
on the authority of an expert and not purporting to be a copy of or an extract
from a report, opinion or statement of an expert unless the person
(a) did
not conduct an investigation sufficient to provide reasonable grounds for
believing that there was no misrepresentation, or
(b) believed there was a misrepresentation.
1995 cF‑17.1 s10
Contravention of right
to associate
11 If a franchisor or its
associate contravenes section 8, the franchisee has a right of action for
damages against the franchisor or its associate, as the case may be.
1995 cF‑17.1 s11
Joint and several
liability
12 All or any one or more of the
persons who are found to be liable in an action under this Act or who accept
liability are jointly and severally liable.
1995 cF‑17.1 s12
Failure to give
disclosure document
13 If a franchisor fails to give a
prospective franchisee the disclosure document by the time referred to in
section 4, the prospective franchisee may rescind all the franchise agreements
by giving a notice of cancellation to the franchisor or its associate, as the
case may be,
(a) no
later than 60 days after receiving the disclosure document, or
(b) no
later than 2 years after the franchisee is granted the franchise,
whichever occurs first.
1995 cF‑17.1 s13
Effect of cancellation
14(1) A notice of cancellation given under section 13
operates
(a) to
cancel the franchise agreements, or
(b) in
the case of an agreement that is an offer to purchase, to withdraw the offer to
purchase.
(2) The franchisor or its associate, as the case
may be, must, within 30 days after receiving a notice of cancellation under
section 13, compensate the franchisee for any net losses that the franchisee has
incurred in acquiring, setting up and operating the franchised business.
1995 cF‑17.1 s14
Other remedies
15 The rights of action conferred
by this Act are in addition to and do not derogate from any other right the
franchisee or franchisor may have at law.
1995 cF‑17.1 s15
Alberta law
16 The law of Alberta applies to
franchise agreements.
1995 cF‑17.1 s16
Limit on jurisdictional
choice
17 Any provision in a franchise
agreement restricting the application of the law of Alberta or restricting
jurisdiction or venue to any forum outside Alberta is void with respect to a
claim otherwise enforceable under this Act in Alberta.
1995 cF‑17.1 s17
Waiver of rights
18 Any waiver or release by a
franchisee of a right given by this Act or the regulations or of a requirement
of this Act or the regulations is void.
1995 cF‑17.1 s18
Burden of proof
19 In any proceeding under this Act, the
burden of proving
(a) an
exemption, or
(b) an
exclusion from a definition
is on the person claiming it.
1995 cF‑17.1 s19
General Regulations
Regulations
20 The Lieutenant Governor in Council may
make regulations
(a) respecting
the form and contents of disclosure documents and other matters relating to
disclosure documents;
(b) respecting
the form and contents of financial statements, reports and other documents
required to be contained in a disclosure document;
(c) respecting
the preparation of financial statements and the reporting requirements for the
financial statements;
(d) respecting
refundable deposits referred to in section 4;
(e) respecting
the notices required to be given under section 10(2)(a) and (b);
(f) defining
terms used in this Act that are not defined in this Act;
(g) restricting
any exemptions made under section 6;
(h) prescribing
the percentage for the purposes of section 1(1)(c);
(i) prescribing
the amount for the purposes of section 5(1)(e);
(j) respecting any matter necessary or advisable
to carry out the intent and purpose of this Act effectively.
1995 cF‑17.1 s20
Self‑government
Self-government
21(1) The Lieutenant Governor in Council may
designate one or more bodies to govern franchising and to promote fair dealing
among franchisors and franchisees.
(2) A
designated body must be a corporation and must in the opinion of the Lieutenant
Governor in Council be capable of governing the persons involved in franchising
and promoting fair dealing among franchisors and franchisees.
(3) The
Lieutenant Governor in Council may make regulations
(a) providing
for the number of directors to be elected and on whose behalf they are to be
elected;
(b) respecting
the powers, duties and functions of a designated body and the enforcement of
any of its powers;
(c) requiring
franchisors and franchisees to be members of a designated body in order to sell
franchises or operate franchised businesses in Alberta;
(d) respecting
bylaws that may be made by a designated body, including bylaws to ensure fair
dealing between franchisors and franchisees;
(e) authorizing
a designated body to charge and collect fees;
(f) respecting
the termination of a designation under subsection (1);
(g) respecting
financial, policy or management audits of a designated body;
(h) respecting
any matter necessary or advisable to carry out the purposes of this section.
(4) A
fee authorized under subsection (3)(e) may be levied only
(a) to
reimburse the cost of the designated body’s administration and the exercise of
the powers and performance of the duties and functions authorized under the
regulations, and
(b) in
an amount and manner and on persons approved by the Minister.
(5) A
body designated under this section is not an agent of the Crown.
(6) If a body is designated under this section, the
body may exercise its powers over and perform its duties and functions in
regard to all franchisees and franchisors whether the franchise was granted
before or after this Act came into force.
1995 cF‑17.1 s21
Transitional Provisions
Transitional
22(1) Section 4(1) to (3) of this Act do not apply to
the sale of a franchise if
(a) before
November 1, 1995 a franchise agreement has been entered into in respect of a
franchise to which this Act applies, and one or more further franchise
agreements are required to be entered into on or after November 1, 1995 to
complete the sale of the franchise, and
(b) a
prospectus or statement of material facts has been given in compliance with the
former Act with respect to that franchise.
(2) Despite
the repeal of the former Act, Part 2 of the former Act, except sections 34 and
35, continues to apply in respect of franchises to which that Act applied.
(3) Any
proceeding, application or other matter commenced under the former Act and not
completed on November 1, 1995 may be continued and completed under the former
Act.
(4) Exemptions under sections 2 and 3 of the former
Act continue until they expire as stated in the orders giving the exemptions.
1995 cF‑17.1 s22
