Proposed New Saskatchewan Franchise Legislation

The Government of Saskatchewan recently introduced Bill 149 on November 9, 2023, to implement new legislation, under The Franchise Disclosure Act that will provide a general scheme of protections for franchised businesses in Saskatchewan.

Harmonization of Saskatchewan Franchise Law With Other Canadian Jurisdictions

Because of the inherent inequalities that exist in the relationship between franchisors and franchisees, provinces across Canada have put in place franchise legislation that entitles franchisees to legal protections, including placing an obligation on franchisors to provide prospective franchisees with certain financial disclosure and material facts about the franchise at the time of entering into franchise agreements.

Saskatchewan is currently one of the few provinces in Canada that does not have any franchise legislation that provides specific protections to franchisees (and, prospective franchisees) – with franchise agreements in Saskatchewan being governed simply by the common law of contracts. If Bill 149 is enacted, Saskatchewan will join British Columbia, Alberta, Manitoba, Ontario, New Brunswick, and Prince Edward Island in having legislated protections in place for franchisees.

The Growing Saskatchewan Franchise Industry

Franchises are business arrangements where a franchisor grants a franchisee a right to engage in a business in which goods or services are sold under a marketing or business plan prescribed by the franchisor, using the franchisor's trademark or trade name, in return for payment of fees and royalties by the franchisee to the franchisor.

According to the Canadian Franchise Association, Canadian franchises contribute over $100 billion per year to the Canadian economy and create jobs for more than 1.9 million Canadians. In Saskatchewan, franchised brands can be seen across the province in the restaurant, hospitality, grocery, and other retail and service sectors.

McKercher LLP Franchise Group

The McKercher LLP franchise group has been actively involved in the development of new franchise legislation Saskatchewan:

  • The writer, in his role as Legislation & Law Reform Chair for the Business Law Section of the Saskatchewan Branch of the Canadian Bar Association ("CBASask"), first put forward a proposal to the Saskatchewan Ministry of Justice and Attorney General, on behalf of CBASask, in April of 2022, for the Province of Saskatchewan to implement franchise legislation in Saskatchewan based on the Uniform Law Conference of Canada ("ULCC") Uniform Franchise Act (see: CBA Saskatchewan Franchise Act Proposal);
  • The writer, along with the CBASK Board of Directors, have worked to engage CBASK members in soliciting feedback and comment, in support of this proposal;
  • McKercher LLP is a member of the Canadian Franchise Association (the "CFA"), a non-profit organization that represents the franchise industry in Canada. As a member of the CFA, the writer advised the CFA Legal & Legislative Affairs Committee with respect to the Saskatchewan franchise legislation; and,
  • The writer was involved in the consultation process with the Ministry of Justice and Attorney General on the development of The Franchise Disclosure Act provisions of Bill 149.

The Introduction of Bill 149

The introduction of Bill 149 on November 9, 2023, by the Honourable Bronwyn Eyre, Saskatchewan Minister of Justice and Attorney General, follows a recent consultation process by the Ministry for the implementation of franchise legislation in Saskatchewan based on the ULCC Uniform Franchise Act (see: Government of Saskatchewan Seeking Public Comments on Implementing Franchise Legislation).

Proposed Provisions of The Franchise Disclosure Act

The proposed provisions for The Franchise Disclosure Act found in Bill 149 are similar to those found in British Columbia's Franchises Act, which, in turn, is based on the ULCC Uniform Franchise Act.

The main features of the proposed The Franchise Disclosure Act, as set out in Bill 149, are as follows:

  1. Duty of Fair Dealing – Every franchise agreement imposes on each party a duty of fair dealing in the performance and enforcement of the franchise agreement, including in the exercise of a right under the franchise agreement;
  2. Franchisee Rights to Associate and Form Associations– Franchisees may associate with other franchisees and may form or join an organization of franchisees;
  3. Franchisor Disclosure – A franchisor is required to provide a prospective franchisee with a disclosure document (containing certain prescribed information), and this disclosure document must be received by the prospective franchisee at least 14 days before the earlier of the signing by the prospective franchisee of the franchise agreement and the payment of any consideration by or on behalf of the prospective franchisee to the franchisor relating to the franchise;
  4. Recession – A franchisee may rescind a franchise agreement within 60 days after receiving the disclosure document if the contents of the disclosure document do not meet the requirements of the Act; and,
  5. Damages – If a franchisee suffers a loss because of a misrepresentation contained in the disclosure document, the franchisee has a right of action for damages against the franchisor.

Major Change to the Saskatchewan Franchise Industry

If enacted, The Franchise Disclosure Act will represent a major change to the Saskatchewan franchise industry and will place substantial new requirements on the franchisors, and franchise systems, that operate in Saskatchewan.

The McKercher LLP franchise group has a strong background in franchise law, including assisting franchisors on the enforcement of their agreements, advising clients on entering into franchise agreements and in the recent developments with respect to new franchise legislation in Saskatchewan. Accordingly, the McKercher LLP franchise group is uniquely positioned to advise clients with respect to legislative changes in Saskatchewan franchise law and what these changes will mean to both Saskatchewan franchisors and franchisees.

A draft of Bill 149 can be found on the Government of Saskatchewan website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.