A recent Ontario Superior Court decision may have significant negative implications on franchisors in Ontario, as it may have created heightened standards for disclosure.

In Raibex Canada Ltd. v. ASWR Franchising Corp. (Raibex), it was found that the Franchise Disclosure Document did not contain all material facts and was absent of information related to leasing obligations and development costs. Under these circumstances, the Court found that it was premature to provide disclosure and enter into a franchise agreement.

In this case, the franchisor provided a disclosure document to the franchisee before a head lease existed and before a location was selected. Although this is common practice, which the Court acknowledged, the Court ultimately found the franchisor liable even though they had no means of predicting costs associated with the head lease.

This threatens a longstanding practice in franchising and is of great concern to CFA. This decision may lead to significant uncertainty of a franchisor's existing obligations with regards to disclosure.

CFA is monitoring this issue closely to determine possible next steps and will keep members informed of further information on this issue as it develops. For more information on other advocacy issues, please contact Samantha Sheppard, Government Relations Specialist at ssheppard@cfa.ca or 1-800-665-4232 ext. 230.