Ontario and Quebec are geographically next to each other, but from a franchise law and regulation perspective, there are a number of differences that present both challenges and opportunities. For franchisors located in Ontario or Quebec, the next growth market may be just across the river but for any success, there must be a deep understanding of what differentiates the two and the practical realities of expanding in either territory.
The biggest adjustment is often faced by Quebec franchisors entering Ontario, where a detailed statutory disclosure regime replaces Quebec’s broader Civil Code framework.
Two provinces, two approaches
The most distinctive thing about Quebec from a franchise law perspective is that the province does not have franchise specific legislation as compared to the other seven provinces in Canada with standalone franchise laws and regulations. Franchise relationships are governed mainly by the Civil Code of Québec (the “Code”). The Code imposes a general duty of good faith and duty to inform which applies before any franchise agreement is signed. A franchisor may be required to disclose information that is material to the franchisee’s decision to enter into the franchise agreement and that the franchisee could not reasonably discover on its own.
Whilst Ontario shares the same duty of good faith, fair dealing and to inform, the province takes a more structured and detailed approach. The Arthur Wishart Act (Franchise Disclosure), 2000 (“AWA”) sets out detailed disclosure requirements and applies to franchises operated wholly or partly in Ontario, regardless of where the parties are based. Its protections generally cannot be waived by contract.
Heading east to west: Quebec into Ontario
Ontario generally requires a franchisor to provide one complete franchise disclosure document (“FDD”) at least fourteen days before the prospective franchisee signs an agreement relating to the franchise or pays any consideration beyond a deposit of 20% of the franchise fee.
The FDD must include all material facts about the franchise. This usually includes:
- financial statements that are compliant with the regulations unless the business is newly incorporated or has not yet had its fiscal year end in which case, an opening balance sheet suffices;
- information about the directors, officers, agents and representatives of the franchisor and their five-year professional history;
- litigation and bankruptcy history;
- franchise fees and estimated costs;
- copies of the agreements the franchisee will sign;
- territory and supplier restrictions; and
- lists of current and former franchisees.
If any material change occurs after disclosure which has an adverse effect on the franchisee or on their decision to join the franchise system, the franchisor must provide a written statement of material change as soon as possible after the material change occurs but before the prospective franchisee signs the agreement.
Evidently, in Ontario, there are many rules that must be followed to ensure compliance. The consequences of getting disclosure wrong in Ontario are significant and well documented in case law. Franchisors have been subject to the rescission remedy for failure to provide financial statements in their FDD, providing the FDD in separate bundles and not as a single pdf, missing signatures, missing certificates and failing to attach a current lease agreement. The basis for this approach by the courts in Ontario is that inaccurate or improper disclosure amounts to no disclosure at all thus giving the franchisee the ability to recoup all their investment including any royalties paid, franchise fees, leasehold improvements, and equipment. The rescission remedy effectively unwinds the franchise agreement and returns the franchisee to the position they were in prior to entering into the franchise agreement.
For Quebec franchisees considering Ontario, the trade-off is a stricter set of statutory rights and a higher threshold of compliance imposed on franchisors.
Quebec-specific language requirements will also generally play a much smaller role in an Ontario franchise operation.
Heading west to east: Ontario into Quebec
Ontario franchisors entering Quebec will not find a statutory disclosure checklist. However, that does not mean disclosure is optional or that the legal risk is lower.
Standard franchise agreements are often presented on largely non-negotiable terms and may therefore be treated as contracts of adhesion under the Code. This may result in any ambiguities in a franchise agreement being interpreted in the franchisee’s favour, any abusive clauses being reduced or struck out, and external documents outside the franchise agreement being unenforceable if they were not properly brought to the franchisee’s attention.
A failure to provide important information can also lead to damages or, in serious cases, annulment of the agreement. The risk is especially high where the franchisor makes unrealistic financial projections, omits important facts or otherwise undermines the franchisee’s ability to give informed consent. For practical reasons, many franchisors adapt their Ontario disclosure documents for use in Quebec and keep a clear record of what was provided and when.
The more obvious operational change is language. The Charter of the French Language, strengthened by Bill 96, generally requires a French version of a contract of adhesion to be provided before a party agrees to be bound by an English version. The franchisor bears the cost of preparing the French version. This cost is not low.
French language rules also affect signage and the workplace. Public signs and commercial advertising are generally required to be in French or to give French a markedly predominant visual impact. From a branding or trademark perspective, this presents a compliance cost for franchisors looking to enter the Quebec market. Additionally, employment offers, policies, training materials and other workplace documents must also comply with French-language requirements. Businesses employing twenty-five or more people in Quebec must form a francization committee and abide by obligations set by the Office québécois de la langue française and undertake the applicable francization process if requested.
The bottom line
For franchisors considering expansion across provincial borders, the challenge is often more about compliance than philosophy. Ontario’s franchise legislation sets a higher procedural bar through extensive disclosure requirements and strict statutory remedies. Quebec, by contrast, relies on broader Civil Code principles, but still expects franchisors to act in good faith, deal fairly and provide information that is material to a franchisee’s decision.
As a result, Ontario franchisors may find the transition into Quebec relatively manageable once French-language obligations are addressed, although those requirements can carry substantial cost and operational implications. Quebec franchisors expanding into Ontario face a steeper adjustment because they must adopt a formal disclosure regime with little tolerance for technical non-compliance. The underlying expectations of franchisor conduct are not dramatically different; the regulatory framework used to enforce them is.
Key takeaways
- Quebec has no franchise-specific legislation. Franchise relationships are governed mainly by the Civil Code of Québec, which imposes a duty of good faith and a duty to inform before an agreement is signed.
- Ontario’s Arthur Wishart Act requires one complete franchise disclosure document at least 14 days before the franchisee signs or pays more than a 20% franchise fee deposit, and its protections generally cannot be waived by contract.
- Disclosure errors in Ontario, such as missing financial statements, signatures or certificates, can lead to rescission, allowing the franchisee to recoup their whole investment.
- In Quebec, standard franchise agreements may be treated as contracts of adhesion, so ambiguities can be interpreted in the franchisee’s favour and abusive clauses reduced or struck out.
- Bill 96 generally requires a French version of a contract of adhesion before an English version is signed, and French-language rules also apply to signage, advertising and workplace documents.
