What is a franchise?
While for most ordinary citizens the word “franchise” conjures up images of McDonalds or PizzaPizza, not many people can clearly define what a franchise is.
When used in the commercial sense, “franchise” refers to the sole right granted by the owner of a trademark or tradename to engage in business or to sell goods or services in a certain area. The owner of the rights is referred to as the “franchisor,” while the person purchasing the rights is called the “franchisee.”
Almost always, the right to use the trademark or traden ame addressed is bundled with access to “know-hows” or other proprietary information not commonly known to the public.
In Ontario, franchising is regulated by the Arthur Whishart Act (Franchise Disclosure), 2000.* The Act provides rules on a franchisor’s obligation to information disclosure and fair dealing. If the franchisor fails to comply with the legislation, the franchisee is entitled to remedies.
*S.O. 2000, c. 3
Note: Please keep in mind that this article is provided for information and educational purposes. It does not constitute legal advice and should not be regarded as such. The law may have changed since the publication of the article.
