Franchising in canada

Transcription

1 Franchising in canada 1

2 FRANCHISING IN CANADA A SUMMARY OF LEGAL CONSIDERATIONS CONTENTS INTRODUCTION... 2 ADVANTAGES AND DISADVANTAGES OF FRANCHISING PROGRAMS... 2 THE LAW GOVERNING FRANCHISING PROGRAMS IN BRITISH COLUMBIA... 3 THE DISCLOSURE REQUIREMENT... 4 FRANCHISING PROGRAM DOCUMENTS... 4 RIGHTS AND REMEDIES OF FRANCHISORS AND FRANCHISEES... 7 ALTERNATIVE ARRANGEMENTS TO FRANCHISING... 7 DISTRIBUTORSHIP ARRANGEMENT... 7 SALES AGENCY ARRANGEMENT... 8 TRADEMARK LICENSE... 8 APPENDIX A THE CANADIAN FRANCHISE ASSOCIATION CODE OF ETHICS AND DISCLOSURE POLICY... 9 Bull, Housser & Tupper LLP - Franchising In Canada Page 1

3 Current to: November 7, 2014 INTRODUCTION In its most basic form, franchising is the purchase of a right or license to utilize a developed system along with established trademarks in order to operate a business. 1 The company that establishes a franchise program is known as the franchisor; the purchaser of the franchise is referred to as the franchisee. There are three basic forms of franchise: 1. business format franchise; 2. product distribution franchise; and 3. business opportunity franchise. In a business format franchise, the party offering or granting the franchise the franchisor will grant the franchisee right to use its established business system. Typically, this type of franchise agreement will be accompanied by a license to use a trademark, trade name, or advertising logos of the franchisor. In addition, the franchisor may also grant a license to the franchisee to use its marketing strategies, promotional material, and reporting systems. 2 In a product distribution franchise, the franchisor is usually a manufacturer, who grants the franchisee the right to sell its products within a defined geographical area. In this type of arrangement, the franchisor generally exerts less control over the operation of the franchisee s business than in a business format franchise. In this regard, the franchisee s business will operate more like an independent business than as a small unit of a larger enterprise. 3 In a business opportunity franchise, the franchisor grants the right to sell products or services supplied by it to the franchisee. In addition to the right to sell those products or services, the franchisor may provide the franchisee with assistance finding a location to do so. 4 In addition to these three forms of franchise, there are two additional type of franchise worth noting: the master franchise, and the multiple-unit franchise, also known as an area development agreement. A master franchise is an agreement between a franchisor and franchisee granting the franchisee the right to grant sub-franchises within a specific geographical region. 5 Similarly, in a multiple unit franchise, or area development agreement, the franchisor grants the exclusive right to the franchisee to open multiple individual unit franchises within a specific geographical region, usually within a specified time period. This type of franchise does not involve subfranchising. 6 ADVANTAGES AND DISADVANTAGES OF FRANCHISING PROGRAMS There are a number of advantages of franchising as a business strategy for both the franchisee and the franchisor. A franchising program permits the franchisor to expand into new territories or markets with less capital investment because the franchisee bears most of the start-up costs. 7 Franchisors may also profit from additional sources of revenue arising from the franchise agreement, including the initial franchisee fee, royalty fees, advertising fund contributions, leases of real property or equipment, rebates from suppliers, and royalty 1 Daniel F. So, Canadian Franchise Law Handbook (Markham: LexisNexis Canada, 2005) at 4. 2 British Columbia Law Institute, Report on a Franchise Act for British Columbia (Vancouver, British Columbia Law Institute, 014) at 6. 3 Ibid at Ibid at Ibid at 8. 7 Bull, Housser & Tupper LLP - Franchising In Canada Page 2

4 income funds. Further, the terms of the franchise agreement may require the franchisee to purchase supplies or inventory from the franchisor, resulting in additional profit. 8 The benefits to the franchisee flow primarily from the financial success of the individual franchise business. Franchisees benefit from the already established goodwill, promotional channels and materials, and the established business system and market for the products or services of the franchised business. These factors contribute to reduced risk and start-up costs for the business, which makes lenders more inclined to provide financing. 9 However, there are also disadvantages to operating business as a franchise for both the franchisor and franchisee. The success of their relationship depends on the parties working to the mutual benefit of the business. For example, the actions of either the franchisor or the franchisee may have an impact on the reputation of the franchised business, which may in turn affect profitability. 10 The significant power imbalance between franchisor and franchisee also limits the ability of the franchisee to take steps to increase the profitability of its individual business during difficult times due to the franchisor imposing obligations and restrictions imposed on the franchisee in the franchise agreement. 11 The Law Governing Franchising Programs in British Columbia Currently there is no special franchise legislation in British Columbia. The relationship between franchisor and franchisee is governed solely by the terms of the franchise agreement and contract law principles. 12 The provinces of Alberta, Ontario, New Brunswick, Prince Edward Island, and Manitoba have all enacted franchise legislation, and there is a high degree of similarity among these provincial franchise statutes. 13 The main features of franchise legislation in those provinces that have such legislation are: 1. Disclosure Requirements: franchisors have an obligation to disclose financial statements, specific information about the franchise system, and the business records of both the franchisor and the franchise being offered. This disclosure must occur at least 14 days before the franchise agreement is entered into. 14 A franchisee may rescind the contract within the timeframe set out in the legislation without penalty or obligation if the franchisor fails to provide a disclosure statement as required. 15 Franchisees may also bring an action for losses arising from misrepresentation in a disclosure document, unless it had knowledge of the misrepresentation when it entered into the franchise agreement Duty of Fair Dealing: All franchise legislation imposes a duty of fair dealing on the parties to a franchise agreement in relation to the performance and enforcement of that agreement Associating: Franchisors are prohibited from preventing or interfering with the right of a franchisee to associate or form associations Contracting Out/Waiver: The parties may not contract out of the provisions of the franchise legislation or governing law of the province. 19 The parties are also prohibited from waiving or releasing themselves of any rights set out in franchise legislation Canadian Franchise Law Handbook, supra note 1 at Report on a Franchise Act for British Columbia, supra note 2 at Ibid at Ibid at Ibid at x. 14 Canadian Franchise Law Handbook, supra note 1 at Canadian Franchise Law Handbook, ibid at Report on a Franchise Act for British Columbia, supra note 2 at x Bull, Housser & Tupper LLP - Franchising In Canada Page 3

5 The British Columbia Law Institute ( BCLI ) recently published the Report on a Franchise Act for British Columbia (the Report ). This report provides recommendations, draft franchise legislation and regulations for British Columbia similar to the legislation in other Canadian jurisdictions. 21 A draft act is currently in the consultation process with various stakeholders, including the Canadian Bar Association, however no party has introduced the draft legislation to the British Columbia Legislative Assembly. 22 In addition to legislated requirements, all franchisors who are members of the Canadian Franchise Association ( CFA ) must adhere to its Code of Ethics and disclosure policy. 23 Failure to comply with these requirements may result in membership sanctions by the CFA. 24 The Disclosure Requirement Although British Columbia has no legislated disclosure requirements, it is good practice for franchisees to request disclosure documents from a franchisor. 25 According to the Report, reputable franchisors already follow the same disclosure practices when marketing franchises in British Columbia as they do in provinces with legislated disclosure requirements. 26 Such franchisors are likely to disclose information in response to a potential franchisee s request. The CFA disclosure policy closely resembles the disclosure requirements in the provinces with existing franchise legislation. The similarities are such that in Alberta and Ontario, franchisor members of the CFA are permitted to substitute the legislated disclosure model with the CFA model. 27 In provinces with no legislated disclosure requirements, while CFA members are obligated to follow the CFA disclosure model, franchisees cannot rely on any of the statutory remedies or obligations which would be otherwise triggered. 28 Franchising Program Documents 1. Franchise Application/Deposit Agreement Before the parties enter into a franchise agreement, the prospective franchisee typically executes a franchise application. The franchisor then releases standard franchise documents to the franchisee. The franchise application will almost always be accompanied by a deposit. Franchisees normally want the deposit to be fully refundable, while franchisors will want to retain a portion of the deposit to cover its expenses in the event that the parties do not complete the franchise agreement. 29 The purpose of the franchise application/deposit agreement is to formalize key aspects of the proposed sale, such as exclusivity of territory (if any) and location of the franchise unit. 30 In addition, the franchise application/deposit agreement will likely include the proposed term of the proposed franchise, and any British Columbia, Legislative Assembly, Hansard, Select Standing Committee on Finance and Government Services, 40th Leg, 3rd Sess, (15 October 2014), online: 3/fgs/hansard/ pm-Finance-Delta-Blues.htm at Zaid, Frank, Canadian Franchise Guide, loose leaf (current to December 2013), (Toronto: Carswell 1992) at The CFA Code of Ethics and Disclosure Document Guide can be found at Appendix A to this memorandum. 24 Canadian Franchise Guide at Ibid at Report on a Franchise Act for British Columbia, supra note 2 at Canadian Franchise Law Handbook, supra note 1 at Ibid at Canadian Franchise Guide, supra note 23 at Ibid at Bull, Housser & Tupper LLP - Franchising In Canada Page 4

6 payment obligations or fundamental terms and conditions of the arrangement that will eventually be incorporated into a franchise agreement Franchise Agreement The franchise agreement is the primary document governing the relationship between the franchisor and franchisee. 32 While each individual agreement will vary depending on the nature of the franchise and the parties, a franchise agreement in a business format type of franchise will contain at least the following elements: (a) a license or grant to use the franchisor s business system, business name, and associated trademarks. 33 This license will usually grant rights to the franchisee, outline its exclusive of territory, and the term. The term of the franchise agreement is usually fixed or tied to the term of a premises lease. 34 After the expiry of the term, the court will not imply an provision in the franchise agreement that the franchise will continue indefinitely; therefore the parties should consider mechanisms for renewal if desired. 35 (b) the location of the franchise unit and the development of the premises; 36 (c) the products or services the franchisee is authorized to provide; 37 (d) any authorized suppliers for the franchise unit; 38 (e) franchisee obligations such as: (i) (ii) (iii) performance standards for the franchisee, usually laid out in a standard operating manual crated by the franchisor; fees or royalties the franchisee must pay during the term of the franchise to continue business as the franchise unit; reporting requirements; and (f) adherence to applicable laws and maintenance of necessary licenses and permits; 39 (g) assignment of responsibility for training and operational assistance; 40 (h) authorized methods of advertising; 41 (i) insurance requirements; 42 (j) a non-competition clause that will operate during the term of the franchise and for a set time after the franchise ends; 43 (k) a clause placing restrictions on the transfer and assignment of the franchise; Canadian Franchise Guide, supra note 23 at Canadian Franchise Law Handbook, supra note 1 at Report on a Franchise Act for British Columbia, supra note 2 at Canadian Franchise Guide, supra note 23 at 3-15 to Peters Auto Sales Ltd. v. Chrysler Canada Ltd. (1990), 63 Man. R. (2d) 295) (Q.B.). 36 Report on a Franchise Act for British Columbia, supra note 2 at Ibid at Report on a Franchise Act for British Columbia, supra note 2 at Ibid at Bull, Housser & Tupper LLP - Franchising In Canada Page 5

7 (l) an indemnity clause protecting the franchisor from third party liability; 45 (m) terms that protect the franchisor s confidential information or trade secrets during the term of the franchise and indefinitely after the franchise ends; 46 and (n) terms that provide for the termination of the franchise relationship by either party. 47 The franchise agreement will also likely contain clauses that deal with governing law and dispute resolution mechanisms. 48 Courts interpret franchise agreements using normal contract interpretation principles and give words in the agreement their ordinary meaning. 49 While the franchisor-franchisee relationship is not inherently fiduciary, the Ontario Court of Appeal concluded that the franchise agreement is a unique form of commercial contract imposing a duty of good faith on the parties that requires them to deal with each other promptly, honestly, fairly and reasonably. 50 Although it is not clear whether this implied duty of good faith exists in British Columbia; 51 the BC Supreme Court agreed with the Ontario Court of Appeal s conclusion on at least one occasion Assignment and Guarantee In cases where the franchisee is an individual, and a closely held corporation is being incorporated to hold the franchise, franchisors will often require both an assignment and a guarantee. Both can be incorporated into the same document. 53 The assignment and guarantee should contain language that operates to transfer the right, title, interest and obligations of the franchisee, as well as a covenant of the assignee to observe and perform all the obligations of the franchisee under the franchise agreement. 54 If the franchisee wishes to assign the franchise agreement to a corporation controlled by the franchisee, the franchisor should require a covenant from the franchisee that he or she will remain the legal and beneficial owner of a majority of the shares of the assignee corporation throughout the term of the franchise agreement Registered User or Trademark Agreement The franchisor will need to grant the franchisee rights to use the franchisor s trademarks in the operation of its business. 56 The parties may address this in a separate agreement or incorporate it into the franchise agreement itself Security Agreement Depending on the nature of the franchise, the parties may wish to enter into a security agreement protecting trade accounts and other amounts that may be owing to the franchisor from time to time during the term of the franchise Ibid at Ibid at Shelanu Inc. v. Print Three Franchising Corporation (2003), 64 O.R. (3d) 533 (C.A.) at Report on a Franchise Act for British Columbia, supra note 2 at Joo v. Shin, 2005 B.C.S.C. 902 at para Canadian Franchise Guide, supra note 23 at Ibid at Ibid at Ibid at Canadian Franchise Law Handbook, supra note 1 at Canadian Franchise Guide, supra note 23 at Bull, Housser & Tupper LLP - Franchising In Canada Page 6

8 6. Sublease or Conditional Assignment of a Lease In cases where the franchisor wishes to retain control over the property or premises where the franchisee s business will operate, the franchisor has three typical forms of real estate control: (a) (b) (c) the franchise agreement itself will provide for the right of conditional assignment of the franchisee s lease with a third party landlord to the franchisor; a sublease between the franchisor (landlord) and the franchisee (tenant); or a lease option agreement in favour of the franchisor in cases where the franchisee is the owner of the property in question Standard Operating Manual The franchisor will often create a standard operating manual for its business system. This manual will lay out the standards, rules, and procedures which the franchisee must adhere to while carrying on business as a unit of the franchised business. The standard operating manual may be incorporated into the franchise agreement by reference, making adherence to its obligations mandatory for the franchisee. 60 Rights and Remedies of Franchisors and Franchisees Because there is no franchise-specific legislation in British Columbia, franchisors and franchisees are limited to the rights and remedies available to them at common law and in equity under the law of contract and tort. 61 At common law, the primary remedy for breach of contract is damages. 62 If one of the parties to the franchise agreement commits a misrepresentation, fraud, or mistake, the innocent party may also seek to rescind the contract to place them back in the position they would have been had the contract not been entered into. 63 Litigation with regard to misrepresentation is very common in franchise disputes. Care must be taken to guard against making a misrepresentation throughout the disclosure process. 64 ALTERNATIVE ARRANGEMENTS TO FRANCHISING Businesses that seek some of the benefits of a franchising, but do not want to develop a franchising system have a few different alternatives available. These alternatives include a distributorship arrangement, a sales agency arrangement, or a trademark license. 65 Distributorship Arrangement In a distributorship arrangement, the distributor grants a license by a supplier to sell products to clients that display the trademark of the supplier. The distributor is responsible for the marketing and sale of those products, and may be limited to sell within a defined territory (exclusively or non-exclusively). In addition, suppliers may require distributors to adhere to certain practices, much like in a franchise arrangement. 66 The benefit of a distributorship arrangement is that the supplier delegates the work surrounding the marketing and sale of its products to the distributor, but is not obligated to comply with all the required elements of a franchise. However, suppliers must not exercise too much control over the distributor in order to avoid 59 Canadian Franchise Guide, supra note 23 at Report on a Franchise Act for British Columbia, supra note 2 at Ibid at Ibid at Peter Snell, Key Points in Advising Franchisors, Vancouver: Continuing Legal Education Society of British Columbia, 2010), at Bull, Housser & Tupper LLP - Franchising In Canada Page 7

9 triggering an accidental franchise. 67 If an accidental franchise is triggered, business may be obligated to comply with the legal requirements of a franchisor in a franchising arrangement. Sales Agency Arrangement Another potential option for businesses that want to be relieved of some of the operational aspects of their business, short of creating a franchise arrangement, is a sales agency arrangement. In this form of business model, commissioned sales representatives, or agents, receive compensation for the products or services they sell. However, there can be no payments made from the commissioned sales representatives to the supplier for this to work; if such payments are being made, this may trigger an accidental franchise and the business may be obligated to comply with the legal requirements of a franchising arrangement. 68 Trademark License Trademark licenses are another way in which a business may be structured to avoid the legal requirements of a franchising program while maintaining some degree of control. The intellectual property of a business can be among the most valuable aspects of a business. In a franchising arrangement, intellectual property is typically protected by a trademark license. However, a trademark license can exist independently of a franchise. The benefit of simply utilizing a trademark license is that the business/licensor may permit other licensee businesses to operate under its trademark and use selected intellectual property in the course of its day-to-day operations in exchange for a licensing fee. Otherwise, the involvement of the licensor is quite limited. One drawback to a trademark license arrangement is that the licensor has less control over the character and quality of the products or services being sold that it would in a franchising arrangement. If the license agreement attempts to grant the licensor too much control over the licensee s business, this may trigger an accidental franchise, requiring the licensor to comply with the requirements of a franchisor Supra note 55 at Bull, Housser & Tupper LLP - Franchising In Canada Page 8

10 APPENDIX A THE CANADIAN FRANCHISE ASSOCIATION CODE OF ETHICS AND DISCLOSURE POLICY (A) CFA Code of Ethics The Canadian Franchise Association (CFA) is dedicated to encouraging and promoting excellence in franchising in Canada. Each member of the Association, by becoming a member and upon renewing its membership from time to time, agrees to abide by this Code of Ethics and to further the Association s goals in encouraging and promoting excellence in franchising in Canada. Each member of the Association agrees to comply with the spirit of this Code of Ethics in its general course of conduct and in carrying out its general policies, standards, and practices. The following are considered by the Association to be important elements of ethical franchising practices: 1. Franchise system and a franchise support services member should fully comply with Federal and Provincial laws, and with the policies of the Canadian Franchise Association. 2. A franchisor should provide prospective franchisees with full and accurate written disclosure of all material facts and information pertaining to the matters required to be disclosed in advance to prospective franchisees about the franchise system a reasonable time [at least fourteen (14) days] prior to the franchisee executing any binding agreement relating to the award of the franchise. 3. All matters material to the franchise relationship should be contained in one or more written agreements, which should clearly set forth the terms of the relationship and the respective rights and obligations of the parties. 4. A franchisor should select and accept only those franchisees who, upon reasonable investigation, appear to possess the basic skills, education, personal qualities and financial resources adequate to perform and fulfil the needs and requirements of the franchise. Franchise systems and franchise support services members of the Association should not discriminate based on race, colour, religion, national origin, disability, age, gender or any other factors prohibited by law. 5. A franchisor should provide reasonable guidance, training, support and supervision over the business activities of franchisees for the purposes of safeguarding the public interest and the ethical image of franchising, and of maintaining the integrity of the franchise system for the benefit of all parties having an interest in it. 6. Fairness should characterize all dealings between a franchisor and its franchisees. Where reasonably appropriate under the circumstances, a franchisor should give notice to its franchisees of any contractual default and grant the franchisee reasonable opportunity to remedy the default. 7. A franchisor and its franchisees should make reasonable efforts to resolve complaints, grievances and disputes with each other through fair and reasonable direct communication, and where reasonably appropriate under the circumstances, mediation or other alternative dispute resolution mechanisms. 8. A franchisor and a franchise support services member should encourage prospective franchisees to seek legal, financial and business advice prior to signing the franchise agreement. 9. A franchisor should encourage prospective franchisees to contact existing franchisees to gain a better understanding of the requirements and benefits of the franchise. 10. A franchisor should encourage open dialogue with franchisees through franchise advisory councils and other communication mechanisms. A franchisor should not prohibit a franchisee from forming, joining or participating in any franchisee association, or penalize a franchisee who does so. 11. A franchise support services member in providing products or services to a franchisor or franchisee should encourage the franchises to comply with the spirit of this Code of Ethics. A franchise support services member should not offer or provide products or services if legislative or professional qualification is required to do so unless the franchise support services member has such qualification. Bull, Housser & Tupper LLP - Franchising In Canada Page 9

11 (B) CFA Disclosure Document Guide 1. Corporate Name of Franchisor (State the name of the Franchisor). 2. Business Experience of the Franchisor Provide a brief history of the experience of the franchisor in the business being franchised, including the number of years in that business. 3. Directors, General Partners and Officers The names of the directors, general partners and officers of the franchisor who will have day-to-day management responsibilities relating to the franchise should be listed. A brief history of the experience of such directors, general partners, officers should also be set out. Further, include a statement that no conviction for an indictable offense under the Criminal Code of Canada involving franchises or other businesses or involving fraud or unfair or deceptive business practices, arising within the last ten (10) years, remains outstanding against any of such directors, general partners or officers, franchisor, or details of any such conviction. 4. Franchise Experience of the Franchisor In this section, the franchisor should set out how long it has been awarding the franchises. The franchisor should also describe any previous franchise systems operated by it or any other franchise systems it currently operating under different trade-marks and trade names. 5. Nature of the Business The nature of the franchisor s business and of the franchises being offered, should be described. 6. Existing Franchises A franchisor will normally include the following information in the form of a list with respect to its existing franchises: (a) Names of existing franchisees; (b) The address and telephone number at which the franchisee can be contacted, and the name of the person to contact, where applicable; (c) The addresses of the franchise locations of the franchisee. Franchisors are strongly encouraged to include such information. If the franchisor does not include the above information, then the franchisor should include a statement describing the opportunity which will be given to the prospective franchisee to have such information disclosed, or made available for review before making a decision to invest in the franchise. The franchisor should disclose, provide or make available for review the above information a reasonable time (at least fourteen (14) days) prior to the execution of any binding unconditional document pursuant to which financial consideration is payable but not refundable 7. Corporate Outlets A list of existing franchisor-owned and affiliate-owned outlets should set out with their addresses. 8. Requires Investment of the Franchisee To the extent possible, the franchisor should set out the investment required of the franchisee broken down into the various categories of front-end franchise fee, initial capital package, initial inventory and leasehold improvements. The franchisor should outline the terms of any available financing given or arranged by the franchisor and the timing of all payments to the franchisor. The franchisor should state whether or not any deposit is required towards the award of the franchise, and if so, the terms of the deposit including amounts payable and refundability should be described. 9. The Franchise Documents Bull, Housser & Tupper LLP - Franchising In Canada Page 10

12 The salient provisions of the franchise should be summarized briefly, i.e. the length of the term and any renewals, amount of the initial fee and when payable, the amount of the royalty and when payable, the amount of the advertising contributions and when payable, any restrictions or investing in ongoing inventory, supplies and equipment, restrictions on the terms and conditions for renewal, assignment, whether and to what extent the franchisee receives an exclusive territory, etc. The franchisor s current policy, if any, as to how close to an existing franchisee outlet the franchisor may establish another franchise or franchisor-owned outlet, other methods of distribution using the same trademark, and other franchises or franchisor owned outlets that distribute similar products or services under a different trade-mark, should be described. The franchisor s current policy, if any, as to whether the continuation of the franchisee s territory depends on the achievement of a certain sales volume, market penetration or other contingency and under what circumstances the franchisee s territory may be altered, should be described. 9. Rebates In this section, the franchisor should provide a general statement whether or not the franchisor or its affiliate receives rebates or other benefits resulting from the investing of goods or services by franchisees and if any such rebates or benefits are shared with franchisees directly or indirectly. 11. Earnings Claims In this section, the franchisor should state whether or not it gives claim information to prospective franchisees. An earnings claim is oral or written information given by a franchisor or its agent from which a specific level or range of actual or potential sales, costs, income from franchises or franchisor-owned or affiliate-owned outlets may be readily ascertained. If the franchisor makes an earnings claim, it must have a reasonable basis in fact at the time it is made, including a description of the facts and assumptions used in its preparation. 12. Opportunity to Review Documents and Investigate the Franchise A statement should be made to the effect that the franchisee will be given not less than fourteen (14) days to investigate the franchise. 13. Bankruptcy and Insolvency A statement should be made to the effect that during the six (6) year period immediately preceding the date of this disclosure document neither the franchisor, nor any director, officer or general partner of the franchisor having day-to-day management responsibilities relating to the franchise has been adjudged or voluntarily became bankrupt or was reorganized due to insolvency or has taken the benefit of any statute for the relief of bankrupt or insolvent debtors or is subject to any pending bankruptcy, insolvency or reorganization proceeding, or the particulars of such bankruptcy, insolvency or reorganization should be summarized. 14. Existing Litigation The franchisor should describe, in reasonable detail, the existence of ongoing material litigation with present or former franchisees involving misrepresentation or unfair or deceptive business practices or violating a law that regulates franchises or businesses. 15. Outlet Closures In this section, the franchisor should provide information about the total number of franchisor-owned, affiliateowned and franchisee outlets have been closed in the two (2) year period prior to the date of the Disclosure Document, and information about the total number of which have been terminated or cancelled by the franchisor, not renewed by the franchisor, reacquired by the franchisor, or which have otherwise left the system during that time. 16. Other Material Information Bull, Housser & Tupper LLP - Franchising In Canada Page 11

13 The franchisor should describe, in reasonable detail, any other information material to the franchise, the franchise relationship or about the franchisor. 17. Certificate of Disclosure The franchisor should include the following two paragraphs in this section. The foregoing information is provided in accordance with the disclosure policy of the Canadian Franchise Association and is current to date. The Canadian Franchise Association has not checked the information and does not know if it is correct. The franchisor is a member in good standing of the Canadian Franchise Association and abides by its Code of Ethics, a copy of which is attached. The franchisee should examine the franchise investment carefully and independent legal, financial and business advice before making a decision to invest in the franchise. (The information provided in this disclosure document, or in any changes made in respect of this disclosure document, is full and accurate information considered by the franchisor to be material to the matters disclosed.) Bull, Housser & Tupper LLP - Franchising In Canada Page 12

14 Bull Housser is a leading law firm with expertise in key industries within British Columbia, serving both Canadian and international clients. We are also one of the largest law firms in Western Canada, with a professional complement of more than 110 lawyers, patent and trade-mark agents and paralegals, and over 150 support staff. We advise Canadian and international corporations, financial institutions and emerging businesses, as well as governments and private individuals, in connection with their legal affairs in Canada and abroad. We bring to our practice a commitment to understand our clients needs and to work with them in fashioning and implementing timely and effective solutions to their commercial and legal objectives. Some of the leading figures of the Province s past have worked at BHT and we have played an integral role in the development of BCs economy as well as its legal system. We treasure our heritage of progressive, independent action, and the reputation we have built while serving our clients in our community. Our long standing dedication to excellence in client service is reflected in the quality and commitment of our people. We actively recruit talented and experienced individuals who share our values and thrive in an environment that is committed to excellence, integrity, client service and teamwork. Suite Howe Street Vancouver, BC V6Z 2M4 T F