When a disclosure document isn’t required

An Ontario court just ruled in favour of Pizza Pizza, saying it does not have to give a new disclosure document to a store owner when a franchise agreement is renewed.

The court relied on a renewal exemption in the Arthur Wishart Act (Franchise Disclosure), 2000, saying that because the franchise holder knew the facts—he would have to renovate his store at some point in the future, as described in the original agreement signed some 15 years ago—there was no requirement to provide them again formally in a new disclosure document.

There are very few court decisions on how and when exemptions to disclosure obligations are available to franchisors. This case makes it clear that disclosure on renewal will not be required, provided the franchisee has full knowledge of material facts as defined by the province.

But franchisors still need to pay close attention to disclosure requirements. Relying on exemptions in the legislation can be costly, and fraught with uncertainty. Though Pizza Pizza won this case, there remain many unanswered disclosure questions.

Whenever a franchise agreement is being considered or renewed, legal advice is needed to understand how Ontario’s disclosure laws will apply.

The full decision is available on-line.