Franchise agreements

How BC law treats it

Franchises in BC are governed by the Franchises Act, SBC 2015, c 35, in force since February 1, 2017, together with ordinary contract law. The Act does not regulate the commercial terms of the agreement or require registration. It focuses on disclosure before signing, the right to rescind, the right of franchisees to associate, and a duty of fair dealing in performing and enforcing the agreement (s. 3). Any waiver or release of the franchisee's rights under the Act is void, except a release given in settling an actual claim (s. 13). Beyond the statute, the agreement sets the deal: the initial franchise fee, ongoing royalties (often a percentage of gross sales), advertising fund contributions, the term and renewal conditions, territory, supply requirements, training and support, transfer rules, termination rights and post-term restrictive covenants. Renewal and support rights exist only if the agreement grants them. The Act does not give a statutory right to renew. Contract law adds the general duty of honest performance (Bhasin v Hrynew, 2014 SCC 71) and the duty to exercise contractual discretion in good faith (Wastech Services Ltd v Greater Vancouver Sewerage and Drainage District, 2021 SCC 7). The Business Practices and Consumer Protection Act does not govern franchise agreements, which are business contracts. Franchise agreements are usually offered on the franchisor's standard form, but some terms can be negotiated, particularly for multi-unit or area developers. Related documents often include a lease or sublease, a general security agreement, personal guarantees and a supply agreement.

What it means for your business

A franchise agreement typically locks the franchisee in for five to twenty years and dictates fees, suppliers, location and exit. Many terms are hard to change once signed. Franchisees should understand the true cost of royalties and fund contributions, the conditions for renewal and transfer, and what happens to the lease and personal guarantees on termination. Franchisors benefit from clear, consistent agreements that comply with the Act and reduce dispute risk across the system. Example: A couple buying a coffee franchise in Nanaimo has a lawyer review the agreement and learns renewal requires a costly store refit and a new agreement on then-current terms. They negotiate a cap on the refit cost before signing.

Risks and common mistakes

Signing the franchise agreement or paying a deposit before receiving the disclosure document at least 14 days earlier. Assuming the franchisee has a statutory right to renew or to receive ongoing training and support. Overlooking personal guarantees and the franchisor's control over the premises lease. Underestimating total costs by focusing on the initial fee rather than royalties and fund contributions. Believing consumer protection laws apply to the franchise relationship.