What does Ontario’s franchise disclosure law require?

The law, and who it applies to

Ontario regulates franchises through the Arthur Wishart Act (Franchise Disclosure), 2000 (the Act) and its general regulation, O. Reg. 581/00. The Act applies to a franchise agreement, its renewal or extension, and the business operated under it, if the business is to be operated partly or wholly in Ontario (section 2(1)). It does three main things: it requires the franchisor to disclose the franchise in a prescribed document before the deal is made, it gives the franchisee strong remedies if that does not happen, and it imposes a duty of fair dealing on both sides for the life of the agreement. We act on both sides of these arrangements, as described under franchising on our corporate law page.

The Act defines a “franchise” broadly, as a right to engage in a business where the franchisee pays the franchisor or its associate, directly or indirectly, and the franchisee sells goods or services associated with the franchisor’s trademark while the franchisor has, or exercises, significant control over or provides significant assistance in the franchisee’s method of operation (section 1(1)). A second branch covers distribution arrangements with location assistance. Whether a brand licence crosses that line is the subject of licensing your brand or franchising.

Three rules underline how seriously the Act is meant to be taken. A franchisee cannot waive or release its rights under the Act; any attempt is void (section 11). A clause restricting the application of Ontario law, or moving the forum for a claim under the Act outside Ontario, is void (section 10). And the burden of proving an exemption is on the person claiming it (section 12).

How disclosure works, step by step

1. The prospective franchisee shows interest. The Act’s duties are owed to a “prospective franchisee“, which includes anyone who has indicated an interest to the franchisor or who has been invited to enter into a franchise agreement (section 1(1)).
2. The franchisor prepares one disclosure document. Section 5(3) requires one document, delivered as one document at one time, and section 5(6) requires all of it to be accurate, clear and concise.
3. The document is delivered properly. Section 5(2) allows personal delivery, registered mail or a prescribed method. Section 12 of the regulation adds electronic delivery, if the document can be viewed, stored, retrieved and printed, contains no links to external content, has an index for each electronic file and the franchisor receives a written acknowledgment of receipt, and courier delivery at the franchisor’s cost.
4. The 14-day period runs. Under section 5(1), the prospective franchisee must receive the document not less than 14 days before the earlier of signing the franchise agreement or any other agreement relating to the franchise, and paying any consideration relating to the franchise.
5. Only limited exceptions apply during that time. A deposit can be taken if it does not exceed the prescribed amount, which section 7.1(1) of the regulation sets at 20% of the franchise fee to a maximum of $100,000, is refundable without deductions, and is given under an agreement that does not bind the prospective franchisee to sign (section 5(1)(b)). Agreements that only cover confidentiality, use of information or the designation of a location, site or territory can also be signed earlier (section 5(1.1)). Under section 5(1.2), such an agreement loses that exception if, for example, it bars the prospective franchisee from sharing information with a franchisee organization, other franchisees or their professional advisors.
6. Material changes are disclosed. If a material change happens before signing or payment, the franchisor must deliver a written statement of it as soon as practicable (section 5(5)), with a signed certificate (regulation section 7.1(2) and (3)).
7. The agreement is signed. From then on, both sides owe the duty of fair dealing in performing and enforcing it.

What the disclosure document must contain

Section 5(4) of the Act requires all material facts, the prescribed financial statements, copies of all proposed franchise agreements and other agreements the franchisee will sign, the prescribed statements to help the franchisee make an informed investment decision, and other prescribed information. The regulation fills in the detail. Among the main items:

• Background. The franchisor’s business background and that of its directors, general partners and officers (regulation section 2), including any convictions for fraud or unfair business practices in the past ten years, administrative orders, civil liability findings, and bankruptcy or insolvency proceedings in the past six years.
• Financial statements. An audited statement, or one meeting review engagement standards, for the last completed fiscal year (regulation section 3), unless the franchisor qualifies for the exemption for large, established franchisors in regulation section 11.
• Four statements at the front. About commercial credit reports, getting independent legal and financial advice, contacting current and former franchisees, and the fact that goods bought under the agreement may not be the cheapest available (regulation section 4), plus a statement about mediation (section 5).
• Costs. All the costs of establishing the franchise, including deposits and fees and whether they are refundable, and estimates for inventory, leasehold improvements and equipment, with their assumptions (regulation section 6, paragraph 1).
• Projections. If the franchisor provides an operating cost estimate or an earnings projection, the basis and assumptions behind it, and where supporting information can be inspected (paragraphs 2 and 3).
• The system. Training, advertising fund use, required suppliers, rebates the franchisor receives, its rights to the trademark, licences the franchisee needs, territory and proximity policies, and termination, renewal and transfer restrictions (paragraphs 5 to 14 and 18).
• Other franchisees. Contact details for Ontario franchisees who left the system in the last fiscal year, reasons for closures over the last three fiscal years, and a list of Ontario franchise locations (paragraphs 15 to 17).
• A signed certificate. Certifying the document contains no untrue information and includes everything required, signed by at least two officers or directors of an incorporated franchisor that has more than one (regulation section 7).

What changes the answer

Rescission: the franchisee’s main remedy

If the franchisor failed to provide the disclosure document or a statement of material change on time, or the contents did not meet section 5, the franchisee may rescind the agreement without penalty or obligation no later than 60 days after receiving the disclosure document (section 6(1)). If the franchisor never provided one at all, the limit is two years after entering into the agreement (section 6(2)). Notice must be in writing and delivered to the franchisor’s address for service (section 6(3)). Within 60 days of rescission, the franchisor must refund money received (other than for inventory, supplies or equipment), buy back inventory, supplies and equipment at the franchisee’s purchase price, and compensate the franchisee for its losses in acquiring, setting up and operating the franchise, less those amounts (section 6(6)).

Damages for misrepresentation

Section 7 gives a franchisee a right of action for damages for a misrepresentation in the disclosure document or a statement of material change, or for any failure to comply with section 5, against the franchisor, its agent, its broker, its associate and every person who signed the document. The franchisee is deemed to have relied on the misrepresentation (section 7(2)), and those liable are jointly and severally liable (section 8(3)). Disputes of this kind need separate advice.

The duty of fair dealing

Section 3 says every franchise agreement imposes on each party a duty of fair dealing in its performance and enforcement, which includes acting in good faith and in accordance with reasonable commercial standards. It runs both ways, and a party who breaches it can be sued for damages (section 3(2)).

The right to associate

Franchisees may associate with each other and form or join a franchisee organization, and a franchisor must not interfere with, prohibit, restrict or penalize them for doing so (section 4). A clause that tries is void (section 4(4)).

Exemptions from disclosure

Section 5(7) lists situations where disclosure is not required, including a resale by an existing franchisee for its own account that is not effected by or through the franchisor, a grant to a current or recent officer or director of the franchisor, an additional franchise substantially the same as one the franchisee already runs where there has been no material change, a renewal or extension without interruption or material change, and the investment thresholds in the table. Section 12 puts the burden of proving an exemption on the person claiming it.

Restrictive covenants and employees

A franchisee who also works for the franchisor, or a seller who joins the buyer, raises separate employment questions. Non-compete rules for employees are covered in are non-compete clauses enforceable in Ontario.

For franchisees and franchisors: what to check

If you are buying a franchise

• Note the date you received the document, and how it was delivered. The 14 days and the 60-day rescission window both run from receipt.
• Check that it is complete: financial statements, every agreement you will sign, the four statements, the cost list and the certificate.
• Call the franchisees listed, including those who left.
• Read the restrictions on suppliers, territory, renewal and transfer.
• Treat projections with care: the document must state the basis for them.

If you are franchising your business

• Prepare one complete document meeting the Act and regulation, and update it for material changes.
• Keep proof of delivery and the date, and never take money or signatures inside the 14 days beyond what section 5 allows.
• Have financial statements ready to the required standard, or confirm you meet the regulation’s exemption.
• Build fair dealing into how you operate, and do not restrict franchisee associations.
• Keep your corporate records in order, since directors and officers sign the certificate; see what goes in an Ontario corporation’s minute book.

Common mistakes

• Signing a “letter of intent” with binding terms during the 14 days. Only the limited agreements in section 5(1.1) are allowed early.
• Taking a non-refundable deposit. A deposit must be refundable without deductions and capped as the regulation sets.
• Delivering disclosure in pieces. It must be one document at one time.
• Assuming an exemption applies. The person relying on it must prove it.
• Leaving out the former franchisees. The list of those who left, and the reasons for closures, are required.
• A waiver clause. Any waiver of a franchisee’s rights under the Act is void.

What to do this week

1. If you have received a disclosure document, write down the date and method of delivery.
2. Diarize the earliest signing date (14 days after receipt) and, after signing, the 60-day rescission date.
3. List what the document contains against the regulation’s main items.
4. Do not pay anything beyond a capped, refundable deposit until the 14 days have passed.
5. If you are buying an existing franchised business, read what happens in due diligence. The deal structure is covered in asset sale or share sale. The process is in buying or selling a business.
6. If you plan to franchise your own business, gather your trademarks, manual and financial statements, as listed in what to bring to a corporate consultation.
7. Have the document and agreement reviewed before you commit. A first consultation takes 30 minutes, by video or in person, and you can request one here.

Frequently asked questions

Sources

• Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3, ss. 1 to 12
• O. Reg. 581/00 (General) under the Arthur Wishart Act, ss. 2 to 9 and 11 to 13

This page is general information about Ontario law, not legal advice for your situation. It reflects the law as of October 26, 2026.