Franchising is an excellent way to expand a business or launch a new venture with the backing of an established brand. But don’t let the hordes of Starbucks and McDonald’s deceive you; it’s not as simple as it seems. 

Franchising, which involves licensing out a business model, brand, and operational system, is full of complex legal considerations. If the process is not carefully managed, it can lead to costly compliance orders, lawsuits, or regulatory penalties. 

To avoid these issues, franchisors and franchisees in BC should know and comply with their legal obligations. This blog will cover seven of the most important. 

1. Complying with BC’s Franchise Laws

To begin, BC-based franchises must comply with the Franchises Act and the accompanying Franchises Regulation. These provincial laws apply to franchisors and franchisees alike.

According to section 5 of the Act, franchisors must provide a Franchise Disclosure Document (FDD) to prospective franchisees at least 14 days before signing the franchise agreement. The FDD should include financial statements and detailed information about the business, fees, etc.

Other key provisions in the Act impose a duty of fair dealing and good faith (section 3), protect franchisees’ right to associate (section 4), and provide remedies such as rescission (section 6) and damages (section 7) when certain obligations are not met.

Failure to comply with BC’s franchise laws can result in significant legal and financial consequences. It is therefore essential for anyone involved in franchising in BC to have a clear grasp of the legislation.

2. A Strong, Legally Binding Franchise Agreement

The franchise agreement serves as the legal basis for the relationship between the franchisor and the franchisee. It’s a detailed, legally enforceable contract that outlines each party’s rights and obligations, thereby protecting their respective interests. 

An effective, well-drafted franchise agreement typically includes the following key components:

  • Franchise fees and royalties
  • Use of trademarks and intellectual property
  • Territory provisions
  • Training and operational support
  • Advertising and marketing
  • Termination clause

This non-exhaustive list serves as a useful starting point. Ultimately, however, the franchise agreement should be tailored to the specific nature of the business and must comply with BC contract law, which is governed by both legislation and case law. 

3. Business and Corporate Registration

If you’re franchising out your business, you are legally required to register a franchisor corporation in BC. This is done through BC Registries and Online Services. It’s the franchisor corporation—not the individual—that enters into agreements and grants franchise rights. If you’re purchasing a franchise, you may also need to incorporate your business before signing the franchise agreement. Either way, registering with the provincial government is mandatory.

You’ll also need to:

  • Register your business name
  • Obtain any necessary permits and licenses
  • Comply with zoning regulations for the physical location of the franchise

If franchisors plan on expanding into other provinces, they should consider whether extra-provincial registration is required. This is especially important for provinces with franchise-specific legislation, such as Alberta (Franchises Act) and Ontario (Arthur Wishart Act). 

4. Trademark Registration and IP Protection

Franchising revolves around licensing a brand. Protecting that brand is therefore a top priority. Trademark registration is a cornerstone of intellectual property (IP) protection. 

Before selling any franchises, franchisors should register their trademarks with the Canadian Intellectual Property Office (CIPO). This includes the business name, logo, slogans, etc.

Registering your trademark offers several significant benefits:

  • Establishes legal ownership in your brand
  • Reduces the likelihood of legal disputes over brand use
  • Promotes your brand’s credibility
  • Grants exclusive rights to use the mark across Canada 

A registered trademark also makes it easier to enforce brand standards and act against unauthorized use or infringement.

5. Marketing, Sales, and Disclosure Obligations

In addition to franchise legislation, franchisors in BC must also comply with broader federal and provincial laws governing the marketing and sale of franchises. These include the Business Practices and Consumer Protection Act and the Competition Act, which explicitly prohibits false or misleading representations. If a potential franchisee relies on misleading or inaccurate information, you may be held liable for misrepresentation—whether or not you intended to deceive them.

6. Duty of Good Faith and Fair Dealing

Under BC’s Franchises Act, both franchisors and franchisees are bound by an ongoing duty of fair dealing and good faith in the performance and enforcement of the franchise agreement. This legal obligation applies at the time of signing and throughout the entire franchise relationship.

To comply with the duty of good faith and fair dealing, both parties must act honestly, reasonably, and not undermine the other’s right to benefit from the agreement. For franchisors, this means providing timely support, enforcing brand standards fairly, and not acting arbitrarily in decisions that affect franchisees (such as renewals or terminations).

A breach of this duty can give rise to legal claims and damages or other remedies under the Act.

7. Complying With Other Provinces’ Franchise Laws

In addition to BC, several other Canadian provinces also have their own franchise laws: Ontario (Arthur Wishart Act), Alberta (Franchises Act), Manitoba (The Franchises Act), New Brunswick (Franchises Act), and Prince Edward Island (Franchises Act). 

If a BC-based franchise plans to operate in one of those provinces, it must comply with their laws, including providing an FDD and meeting any local registration or disclosure timelines. Failure to do so can lead to rescission, fines, and legal liability.

Investing in Your Franchise’s Success

Starting a franchise in BC is an exciting prospect; it allows franchisees to build on an established brand’s success, and franchisors to expand their business and reach new markets. 

But with that opportunity comes significant legal responsibilities, including compliance with the Franchises Act and Franchises Regulation, federal and interprovincial laws, business and corporate registration, marketing and disclosure obligations, trademark and IP protection, and ongoing duty of good faith and fair dealing. 

When it comes to the legal intricacies of franchise law, knowledge is power. Understanding your legal responsibilities can protect your business, your brand, and your investment.

Contact CM Lawyers for Dependable Franchise Advice in Vernon & Salmon Arm

At CM Lawyers, our knowledgeable business lawyers provide trusted legal guidance across all aspects of franchise law. We advise both franchisors and franchisees on a wide range of legal issues. Whether you’re a franchisor seeking to expand your brand or a franchisee looking to secure a successful business venture, our team will guide you through the process, ensuring your rights are protected and your business goals are achieved.

With convenient office locations in Vernon and Salmon Arm, CM Lawyers proudly serves clients throughout the surrounding communities, including Northern Okanagan and Shuswap. To discuss your business law matter with our team, please contact us online or call our Vernon office at (250) 308-0338 or our Salmon Arm office at (250) 803-9171.