Saskatchewan is on its way to become the next “disclosure province” with the introduction of Bill 149.
The Government of Saskatchewan is considering the enactment of provincial franchise disclosure legislation, and on November 9, 2023 it introduced Bill 149, The Franchise Disclosure Act (“FDA”). Bill 149 has gone through the First Reading process (“First Reading” means the Bill is introduced and read for the first time. There is no debate occurs at this stage, and there is the option to refer the Bill to a committee that will conduct public hearings on its content). Bill 149 is currently before the Saskatchewan legislature for its second reading. It has not been given Royal Assent and there is no coming into force date set.
Currently, there is no franchise-specific legislation in Saskatchewan and disputes are generally governed by common law principles usually based in contract law. The new legislation being considered in Saskatchewan would likely mean that Franchisors would need to comply with a disclosure regime in that province, similar to BC, Alberta, Manitoba, Ontario and other Canadian jurisdictions with franchise legislation.
In fact, the proposed Saskatchewan FDA resembles the legislation in BC, Alberta, Manitoba, and Ontario. It appears to use the same or similar language as the statutes in these jurisdictions and does not contain many unique provisions.
What does this mean for Franchisors?
Franchisors currently operating in Saskatchewan or contemplating offering franchises in Saskatchewan should closely monitor the status of the FDA and start preparing for implementation. The critical item will be to have a franchise disclosure document (“FDD”) compliant with the FDA.
The Saskatchewan government will implement Regulations to accompany the FDA, which will provide additional detail regarding what franchisors will need to include in an FDD to comply with the legislation.
Will the new Act apply to existing Saskatchewan franchise agreements or arrangements?
Unfortunately, the answer is “Sort Of.”
The FDA states that it will apply only to franchise agreements “wholly or partly in Saskatchewan entered on or after it comes into force.”
However, certain requirements of the FDA will apply to existing franchise agreements including:
- the duty of fair dealing,
- the right to associate,
- exclusions for executor, administrator, sheriff, receiver, trustee, trustee in bankruptcy, liquidator or guardian on behalf of a person other than the franchisor or the estate of the franchisor, joint and several liability, inability to waive rights, and
- requirements regarding jurisdiction.
Existing franchise agreements may therefore be impacted by the FDA.
Will there be a rescission right for Franchisees?
Yes – the FDA does contain a right to rescind (meaning to terminate or cancel) a franchise agreement if a Franchisor fails to provide a compliant FDD. The FDA, in its current form, contains a rescission remedy available “if the franchisor fails to provide the disclosure document within those” two years.
The approach taken by Saskatchewan as to whether an FDD is compliant is like that in BC and Manitoba. An FDD may be “substantially compliant” meaning there is some wiggle room for minor or immaterial deficiencies or technical irregularities. The caveat is that such defects must not affect the substance of the FDD. It appears that franchisees will not be able to rescind a franchise agreement merely due to a minor technical or immaterial deficiency.
The proposed FDA contains other wording and application differences from existing provincial franchise legislation and will need to be reviewed fully.
We can assist with navigating the franchise landscape in Western Canada. Contact us for further information.
By: Marta Davidson
Publication Date: February 12, 2024
Note: this article is for information purposes only and is not legal advice, is not exhaustive of all possible legal rights or remedies, and is not updated after the date of publication to account for changes to law or other circumstances that may impact its accuracy. Do not rely on these materials for legal advice or opinion. You should consult your own legal advisor for advice for your situation.
