Ridout Barron

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Franchisee misrepresentations

Alberta individuals who want to take advantage of running a business with a recognized name may choose to pursue owning a franchise. Before entering into a legally-binding relationship, these individuals may wish to read about their rights and the effect of the agreement between the parties.

The Uniform Law Conference of Canada is responsible for promulgating business and commercial laws pertaining to franchises. If an individual decides to pursue ownership of a franchise and makes this decision based on a misrepresentation made by the franchisor, the individual may be able to recover damages. This is the case when the misrepresentation was part of the disclosure document, in a material change statement or when a franchisor has failed to provide certain documents as required by law. The disclosure document must contain the business' financial statements, franchise agreements, other documents for the franchisee to sign, information necessary to help the franchisee make an informed investment decision and other information particular to the parties.

In order to prevail with a claim of this nature, the franchisee must have actually relied on the misrepresentation. The franchisor can raise the defence that the franchisee did not actually rely on the misrepresentation to avoid liability. If a dispute arises, the franchisee must notify all relevant parties of the dispute. The parties are required to attempt to resolve the dispute within 15 days of receiving this notice. If this does not work, any party can request mediation to help settle the dispute.

Individuals who have been victim to such a misrepresentation may have a cause of action against the franchisor, his or her broker, his or her associate and whoever signed the disclosure statement or material change statement. A lawyer may be able to discuss which party may be liable for the damages that the franchisee suffered.

Source: Uniform Law Conference of Canada, "Current Uniform Acts", October 20, 2014

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Ridout Barron
1827 14th Street SW
Calgary, AB T2T 3T1

Phone: 587-315-8454
Fax: 403-271-8016
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