Recent legal developments in the franchising space across Canada demonstrate that franchise law remains dynamic and ever-evolving. Notable expansion to the scope and nuance to interpretation of franchise disclosure requirements and increased scrutiny of conduct for franchisors and franchise systems is ushering in a phase of complexity in compliance practices. The current era of franchise law is defined by heightened regulation, scrutiny and a growing interplay between changing economic trends and continued technological advances across the country and the globe.

This edition of Trends and Developments begins with legislative updates. Saskatchewan’s newly-enacted (but not yet in force) Franchise Disclosure Act (“the Saskatchewan Act”) and proposed Regulations aim to enhance cohesion across the regulated provinces of British Columbia, Alberta, Manitoba, Ontario, New Brunswick and Prince Edward Island (collectively, the “Regulated Provinces”), while contemplating certain unique and nuanced procedural obligations of which franchisors should be aware.

Next, we turn to Manitoba’s response to the recent Competition Act amendments – ie, the prohibition of certain restrictions and property controls within the commercial leasing context, in contrast with the franchise sector’s historical reliance on exclusivity covenants and franchisee expectations of territorial protection. We then touch on British Columbia’s recently enacted Business Practices and Consumer Protection Amendment Act (BPCPPA), which introduces changes with implications at the franchise system and franchisee-to-consumer level.

We go on to review two Ontario cases – Re: The Body Shop Canada Limited (CV-24-00723586-00CL, Endorsement dated December 14, 2024) (“TBS Canada”),and 2355305 Ontario Inc. v Savannah Wells Holdings Inc., 2025 ONCA 505 (“Jayasena”), providing insight into how fact-specific contexts can qualify or exempt disclosure obligations and emphasising the importance of a considered approach to compliance in the applicable circumstances.

Finally, we conclude with a brief discussion of parallel developments in economic volatility and the proliferation and mandate of technology and AI and the potential implications for franchise systems in 2025. Such developments bring new challenges and opportunities for franchise systems looking to operate proactively and strategically.

Saskatchewan’s Franchise Disclosure Act

On 8 May 2024, the Saskatchewan Act received Royal Assent, with The Franchise Disclosure Regulations (the “Saskatchewan Regulations”) published on 16 April 2025 and expected to come into force in late 2025 or early 2026. The Saskatchewan Act will align Saskatchewan with other Regulated Provinces requiring mandatory franchise disclosure, but includes notable distinctions and nuances that franchisors must understand when operating or planning to operate in the province.

Saskatchewan’s proposed investment threshold, similar to that of British Columbia, is set at CAD5 million, which exempts franchisors from the requirement to provide a disclosure document (Section 6(8)(i) of the Saskatchewan Act) if the prospective franchisee is investing an amount greater than this threshold. This threshold is higher than Ontario’s CAD3 million threshold, limiting the ability of franchisors to rely on disclosure exemptions below that level when operating in Saskatchewan. The Saskatchewan Act and Saskatchewan Regulations also require explicit disclosure of proximity policies and how multiple outlets under the same brand are governed (Subsection 12–14 of the Saskatchewan Regulation).

While most provinces require financial statements to be prepared with the generally accepted accounting principles (GAAP) of the jurisdiction in which the franchise is based, Saskatchewan mandates compliance with GAAP applicable to the franchisor’s jurisdiction (Section 7(3) of the Saskatchewan Regulations). This subtle distinction could be easily overlooked, and franchisors may risk non‑compliance unless their financial statements are reviewed and prepared based on this requirement.

The prescribed risk-warning language in Saskatchewan also diverges, omitting the term “expert” and requiring Saskatchewan’s statement to appear separately from those of other Regulated Provinces in multi-jurisdictional disclosure documents.

In sum, Saskatchewan’s entry into legislated franchise regulation reinforces the benefits of harmonisation, while underscoring the importance of understanding provincial nuances in statutory compliance. Structuring disclosure documents to accommodate these differences while maintaining document precision and traceability will be essential for any franchisor expanding nationally. Franchisors and franchisees operating, or intending to operate, in Saskatchewan should adapt disclosure documents accordingly and seek timely legal and financial advice to ensure precision and continued compliance with the new regime.

Provincial Response to Enhanced Competition Law Scrutiny

Manitoba has enacted The Property Controls for Grocery Stores and Supermarkets Act (Various Acts Amended), SM 2025, c27 (“Manitoba’s PCGSS Act”) which operates alongside recent federal Competition Act reforms to further regulate and restrict property controls. Effective 3 June 2025, the PCGSS Act targets restrictive covenants, exclusivity clauses and analogous property controls in the grocery sector that are seen to limit competition. It voids most new grocery store property controls going forward and establishes a process for reviewing and, in limited cases, justifying existing ones.

A “property control” includes, with limited exceptions, covenants or exclusivity clauses restricting the sale, ownership, development or use of land as a grocery store or supermarket, granted in favour of an operator or a related party.

Pre-existing property controls are void and unenforceable, unless the agreement is registered on title before 30 November 2025, with registration accepted by Manitoba’s Land Titles Office by 30 December 2025. All registered property controls remain subject to the ongoing right of review by the Municipal Board on application by the Minister of Public Service Delivery or any third party. Any person, including private individuals, franchisees or government, will be able to apply to the Minister to request the review of a registered property control. The onus on the business to prove the control is “clearly” in the public interest, beyond private commercial protection for the parties who negotiated it, or risk cancellation, variation or replacement.

Manitoba’s PCGSS Act represents a significant departure from standard commercial leasing practices in Manitoba in the grocery retail and franchise sector. For franchisors in the grocery sector, the PCGSS Act necessitates careful contract audits in light of business plans and projections and, where possible or desirable, registration of legitimate protections and readiness to defend them publicly, particularly where tied to site planning or anchor tenant stability.

Manitoba is the first province to adopt such statutory measures, and could serve as a model for other jurisdictions, with the Competition Bureau potentially advocating for similar reforms. Forward-looking franchise systems would be well served by exploring alternative strategies to safeguard market and territory allocations to ensure that policies remain viable and attractive to existing and prospective franchisees.

British Columbia’s Business Practices and Consumer Protection Amendment Act

The Business Practices and Consumer Protection Amendment Act (Bill 4, 2025) (BPCPAA) in British Columbia received Royal Assent on 31 March 2025. However, several significant provisions are not yet in force and await future activation by regulation. Among the provisions already in effect are prohibitions in consumer contracts on arbitration clauses, class-action waivers, and terms restricting the posting of online reviews. These restrictions apply retroactively, and render any existing clauses void.

Among other things, the BPCPAA significantly tightens disclosure standards, requiring up-front clarity on pricing, cancellation, renewal, returns and other key terms in consumer-facing contracts. Notably, for non-consumer (business-to-business) contracts, the BPCPAA also limits the enforceability of arbitration and class-action restrictions, but only in cases involving “low-value claims”. The monetary value for what constitutes a low-value claim remains to be prescribed by regulation.

Franchisors operating in British Columbia should be proactive and closely audit and update all consumer-facing agreements, including franchisee-to-consumer contracts, and subscription and renewal clauses, ensuring full transparency and removing any prohibited terms. Franchisees, even when acting as intermediaries, must be aware that consumer protections prevail over standard contractual provisions, and it is common practice for franchisors to impose obligations on a franchisee to comply with applicable local laws. Franchisors and franchisees alike should prepare by remaining abreast of regulatory developments, training their teams, and beginning the process of adapting internal processes and manuals ahead of enactment.

Case Law Developments

Re: TBS Canada

In the last weeks of 2024, the Ontario Superior Court of Justice (ONSC) granted an exemption from Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 (AWA) during urgent Companies’ Creditors Arrangement Act (CCAA) proceedings. TBS Canada faced severe financial distress after its UK parent entered into administration and was placed under the control of a licensed insolvency practitioner in February 2024, cutting off its funding. With creditor value and hundreds of jobs at stake, the court-supervised sale process set closing deadline of 16 December 2024.

Ordinarily, franchisors in Regulated Provinces must deliver a compliant franchise disclosure document and observe a 14-day cooling-off period before a franchise agreement can be signed. In this case, the ONSC held that strict compliance with the AWA would have jeopardised the sale. Among other factors considered, the buyer, a sophisticated, private equity affiliate with extensive franchise experience, had conducted due diligence for months, negotiated directly with the UK parent company, and was represented throughout by expert franchise counsel. Given these factors, and the public-interest objectives of preserving jobs and business continuity, the court found the disclosure relief justified in the circumstances.

Pertinent takeaways from TBS Canada include the following:

• exemptions to disclosure obligations are rare and fact-specific by design – in this case, an urgent CCAA restructuring proceeding with imminent closing deadlines;
• sophistication counts – the buyer had extensive franchise experience, had conducted lengthy due diligence, and had representation by expert legal counsel throughout, which may be seen as mitigating the need to address what is typically the informational imbalance between franchisor/franchisee in the franchise context;
• public-interest factors – preserving jobs, maintaining operations and maximising creditor recovery may have influenced the ONSC in granting the exemption; and
• intact disclosure obligation – the generalisability of this case was limited, with the AWA protective purpose remaining unchanged for typical franchisees and small-business investors.

While fact-specific and arising in a restructuring context, the TBS Canada decision signals a narrow judicial willingness to flex franchise disclosure rules when the counterparty is well advised, the timeline is critical, and broader stakeholder interests are at risk. For franchisors, this is not a general relaxation of obligations but a reminder that targeted relief may be available in exceptional, well-documented circumstances.

Jayasena

The Ontario Court of Appeal (ONCA) recently upheld the trial decision in Jayasena confirming that, among other things, the franchisee had validly rescinded its franchise agreement and the franchisor could not rely on the statutory disclosure exemption in Subsection 5(7)(a) and 5(8)(a) of the AWA.

In this case, the franchisees had purchased an existing Wild Wing franchise from another franchisee, operated it unsuccessfully for 18 months, then served a rescission notice under the AWA and abandoned the business. At trial, they sought declarations that: (i) the agreements related to the franchise were rescinded under the AWA, and (ii) that certain defendants were “franchisor’s associates” for the purposes of the AWA.

In its reasons, the ONCA reaffirmed its earlier decisions in 2189205 Ontario Inc. v Springdale Pizza Depot Ltd., 2011 ONCA 467, 336 D.L.R. (4th) 234, leave to appeal refused [2014] S.C.C.A No. 35648 (“Springfield Pizza”) and 2256306 Ontario Inc. v Dakin News Systems Inc., 2016 ONCA 74 (“Dakin”):

• the AWA is remedial, intended to redress the imbalance of power between franchisor and franchisee;
• disclosure exemptions are to be “narrowly construed”;
• if a franchisor requires a new franchise agreement to be signed, the re-sale disclosure exemption under Section 5(7)(a) of the AWA no longer applies (Dakin);
• where the franchisor merely passively consents to a transfer of a franchise, the exemption can still apply (Springdale Pizza); and
• the onus rests on the franchisor to prove that a disclosure exemption applies.

A critical issue in Jayasena was whether the franchise was granted “by or through” the franchisor, or whether the franchisor merely consented to the transfer of the franchise. Under the AWA, such granting is not “by or through” a franchisor merely because it has an approval right or collects a transfer fee; “something more” is required.

The ONCA found there was ample evidence for the trial judge to conclude that the transfer and grant of the franchise was effected through the franchisor.

Among other things, the trial judge found that Mr Chandiok effectively acted as the “Franchisor’s representative” and played more than a passive role, including: (i) steering the franchisees to a specific franchise for sale, (ii) providing a tour, including of non-public areas; (iii) printing sales summaries from the restaurant’s computer system; and (iv) explaining Wild Wing’s systems and how to operate them, among other things. The franchisees believed, rightly or wrongly, that he was associated with the franchisor. This level of involvement supported the finding at trial that the franchisor could not rely on the re-sale disclosure exemption.

The ONCA upheld the trial judge’s reasoning and held that the exemption was unavailable to the franchisor because:

• the franchisor required a new franchise agreement to be signed (as in Dakin); and
• the franchisor’s representative took an active role in the transfer, going beyond the passive consent of the franchisor (Springdale Pizza).

The ONCA confirmed that either basis would be sufficient, and that both align with its prior jurisprudence.

The Jayasena case underscores that a franchisor’s representative’s active involvement in the franchise sales and development processes can trigger characterisation as a “franchisor’s associate” under the AWA, carrying personal liability along with the franchisor for disclosure deficiencies. This risk was highlighted in Royal Bank of Canada v Everest Group Inc., 2024 ONCA 577 (the “Paramount”), where the ONAC upheld that a franchisor cannot avoid liability by distancing itself from the franchise sales process, as the law looks to the substance of involvement by the franchisor and its associates (not just those in name only).

Once the actions of a representative are in progress and resemble the granting of a new franchise approval, the exemption for passive transfers evaporates, and full disclosure obligations are imposed, notwithstanding that the franchisor itself may not have got itself involved. This not only exposes the individual representative(s) to liability but also draws the franchisor into potential rescission claims and damages.

This decision is a caution to Canadian franchisors as follows.

• Active participation in resales or transfers risks converting a simplified transfer into a compliance-heavy transaction.
• The franchisor cannot shield itself through internal separate from sales or development as liability attaches to the actions taken (or seen to be taken) in its name.
• System-wide compliance oversight is critical; franchisors must monitor and govern representatives’ conduct to ensure it remains within the law.

Jayasena reinforces that Ontario courts will construe disclosure exemptions narrowly, and that franchisors bear the burden of proving their applicability. Ultimately, compliance is a system-wide responsibility that rests on the franchisor’s shoulders, no matter who carries out the work. From a practical perspective, many franchise systems will err on the side of providing compliant disclosure to prospective franchisees notwithstanding the availability of a potential disclosure exemption to mitigate risk.

Economic Shifts and Financial Disclosure

In addition to legislative changes and case law developments, the Canadian franchise industry is feeling the effects of global economic and geopolitical volatility. Economic uncertainty in global markets due to rising inflation, supply-chain disruptions, tariff and trade disputes, wage pressures and fluctuating interest rates have heightened the need for financial transparency and increased due diligence considerations for potential investors. These pressures affect both franchisee performance and the accuracy of franchisors’ disclosure.

Franchisees are more frequently seeking detailed earnings projections and certainty around costs, including start-up and ongoing fees, operational budgets and profitability expectations. Under Canadian franchise disclosure laws, franchisors must disclose a detailed estimate of the total investment required to open and operate the franchise, including product, equipment, inventory and service costs, which are often subject to “approved supplier” or “approved product” restrictions.

While franchisors may choose whether to provide forward-looking financial performance representations, doing so carries risk; if projections are not met, franchisees may be motivated to seek remedies. In the Regulated Provinces, any such representations, including historical earnings or projections, must include descriptions of assumptions, methodologies, and often supporting documentation. Non-compliance can expose franchisors to rescission or enforcement. Informal statements by sales representatives, agents or associates can also be treated as earnings claims, even without formal documentation. It remains critical for franchisors to implement strict internal controls to ensure only standardised, vetted and up-to-date materials are used, that assumptions are clearly stated and supporting data is available.

Global economic conditions also impact franchise cost disclosures. Where supply chains rely on the US or other foreign sources currently subject to tariffs, sanctions or trade restrictions, franchisee costs can change dramatically and without warning. Such volatility can undermine the reliability of franchisors’ cost estimates. In response, some franchisors now qualify cost disclosures to reflect a specific point in time and note that figures are subject to change due to external factors such as tariffs or supply-chain issues. This approach is aimed at maintaining legal compliance by anchoring estimates to documented circumstances, reducing reliance risk if actual costs later diverge.

To further mitigate exposure, along with the broader business community, Canadian franchisors with international supply chains are exploring flexibility in sourcing. Some permit Canadian franchisees to obtain approved products domestically or from alternative suppliers provided they meet the system’s brand standards. While no Canadian court has yet ruled specifically on whether such broadly qualified disclosures satisfy statutory requirements in the circumstances, these measures reflect a trend towards proactive cost management, franchisee awareness and overall risk mitigation.

Economic turbulence increases the risk of performance shortfalls, franchisee dissatisfaction and potential damage to brand goodwill. Allegations that projections in disclosure were misleading, incomplete or based on unrealistic assumptions are more likely without a documented basis and transparent rationale.

To mitigate these risks, franchise systems should integrate robust compliance protocols including standardised financial disclosure packages, subjecting all projections to legal and accounting review, maintaining version-controlled delivery logs and utilising clear and appropriate disclaimers. In the current environment, accurate, transparent and compliant disclosure is not just a legal obligation but a strategic necessity for brand protection and franchise system stability.

Technology Mandates and AI in Franchise Systems

A major trend set to influence franchise systems in 2025 and beyond is the rapidly evolving technological landscape and growing use of AI. Franchisors increasingly mandate specific systems including point-of-sale, automated customer service, booking engines or proprietary AI platforms for franchisees, to ensure the delivery of a uniform brand experience, consistent reporting and centralised data collection. While mandated technology updates offer certain operational and competitive advantages, they also introduce certain legal and adaptability challenges.

A franchisor’s ability to mandate software and technology adoption typically stems from the franchise agreement. However, not all agreements are explicit. Broadly drafted or outdated provisions may not clearly authorise the franchisor to demand adaptation of newer or AI-driven technologies. Disputes can arise when mandated technology imposes significant costs, disrupts operations or offers uncertain value. Without clear contractual authority, franchisees may challenge the scope or legitimacy of a mandate, creating conflict over cost allocation and feasibility.

To manage evolving technology, agreements should permit both initial adoption and ongoing updates, upgrades and system overhauls. Still, sweeping system-wide changes, particularly those involving unproven technologies or major disruption, can face resistance. Franchisees may hesitate when costs are high, benefits unclear or changes undermine existing workflows and investments. Balancing innovation with fairness is critical. Franchisors must consider their duty of good faith and fair dealing, ensuring mandates are necessary, proportionate and demonstrably beneficial to the system.

Franchisees also have a stake in system modernisation. Stagnation or uneven adoption risks diminishing brand competitiveness, while non-adopting franchisees can hinder overall system performance. Poorly planned or inequitable mandates can erode rather than enhance franchisee value. As technology becomes central to customer engagement, operational decision-making and marketing automation, its role brings both opportunity and novel legal and management challenges.

Addressing these issues requires well-drafted franchise agreements with clear contractual language, transparent rollout plans and cost-benefit justification. By engaging experienced franchise counsel to structure authority, manage implementation and align value expectations, franchisors can reduce disputes and maintain compliance. As technological innovation accelerates, a coherent and contractually sound approach to technology mandates is essential for sustainable franchise system growth.

Conclusion

Franchise law in Canada is entering an era of heightened regulation, intensified scrutiny and rapid convergence of shifting economic trends with accelerating technological change. Legislative reforms and emerging 2025 case law are reshaping disclosure obligations and compliance expectations for franchise systems nationwide. This environment ushers in conditions that reward agile, strategic and informed systems – those that adapt operations, sales strategies and technology use while embedding such changes into compliance practices across all jurisdictions. Proactive systems that seek timely legal and professional guidance will be best positioned to manage risk, maintain compliance and thrive amid the ongoing evolution in the franchise legal landscape.