Key changes and impact of franchises
The Business Practices and Consumer Protection Amendment Act, 2025 (the Amending Act), currently being proposed through the legislature, targets contractual terms that limit consumer access to legal remedies. While the reforms primarily address consumer transactions, their reach extends into commercial agreements, creating new challenges and considerations for franchise systems.
Central to the Amending Act is the prohibition of class action waivers and mandatory arbitration clauses in consumer contracts. These clauses, common in franchise-operated businesses from gym memberships to retail service agreements. These clauses will become void if the legislation passes. Franchisors relying on such terms to mitigate class action risks will need to overhaul consumer-facing contracts. Retrospective application further complicates matters, as existing agreements may suddenly contain unenforceable terms, exposing franchisors to litigation.
For non-consumer contracts, including franchise agreements, the legislation introduces “low-value claims” disputes under a yet-to-be-specified monetary threshold. Clauses mandating arbitration or barring class actions will become “inoperative” for these claims. Franchisees pursuing minor disputes over royalties, marketing fees, or operational compliance could bypass arbitration, opting instead for court or class proceedings. This shift may embolden franchisees to challenge franchisors over smaller grievances, increasing legal exposure and operational costs.
Disclosure and subscription changes
The Amending Act imposes stringent disclosure requirements, mandating clear terms on pricing, refunds, renewals, and cancellations. Franchisors must ensure franchisees provide transparent consumer contracts, particularly for subscription-based services (e.g., meal kits, maintenance plans). Automatic renewals for subscriptions under 60 days will require cancellation flexibility without penalties, while longer-term agreements must notify customers of renewal dates. Franchisors using standardized agreements across provinces must adjust terms to meet B.C.’s heightened standards, avoiding non-compliance risks.
Strategic considerations for franchisors
The amendments align B.C. with provinces like Ontario and Quebec, where class action waivers in consumer contracts are already unenforceable. However, B.C.’s inclusion of low-value commercial claims sets a precedent, potentially inspiring similar reforms elsewhere. Franchisors operating nationally must navigate a patchwork of regulations, complicating contract standardization.
Proactive steps are essential. Franchisors should audit existing agreements with legal counsel to identify void or inoperative clauses. Consumer-facing documents, particularly clickwrap terms for digital services, require immediate review. Training programs for franchisees on compliant sales practices and disclosure obligations will mitigate enforcement risks.
Conclusion
For franchise stakeholders, the message is clear—proactive legal review and operational adjustments are not just prudent but imperative to navigate the coming changes. The era of relying on arbitration to deter class actions is fading, and franchises must evolve alongside the law to safeguard their interests.
The Amending Act represents a dual-edged sword: enhancing consumer protections while escalating legal and operational complexities for franchises. Franchisors must balance compliance with strategic risk management, recognizing that B.C.’s reforms could foreshadow broader trends in Canadian consumer law. As the legislation progresses, staying informed and adaptable will be critical to maintaining franchise resilience in a shifting legal landscape.
Always consult a lawyer and accountant familiar with Ontario franchise law before finalizing any transaction. This article is for informational purposes only and does not constitute legal advice.
