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Ontario Releases Regulation under Healthy Menu Choices Act, and Franchisors Are At Risk!

Published: 04/13/2016

By Larry M. Weinberg, Frank Robinson

Following a consultation period in which the Ontario Government sought input from stakeholders in the food service industry, a new Regulation under the Healthy Menu Choices Act was published in the March 19 issue of the Ontario Gazette. The Healthy Menu Choices Act (the Act) will require regulated food service premises with 20 or more locations in Ontario that are selling prepared ready-to-eat food to post itemized caloric content on menus.

Cassels Brock addressed this new legislation and its potential impact on restaurant and food service franchisors in previous newsletters in May and October of last year.

The Act implicates franchisors by stating that an owner or operator of a regulated food service premise “means a person who has responsibility for and control over the activities carried on at a regulated food service premise, and may include a franchisor, a licensor...”.

While the definition leaves open the possibility that a franchisor is not always liable for compliance, the above reference to responsibility and control (as opposed to ownership) leave open the more likely possibility that the government intends for every franchisor to be caught, as they arguably all exercise some measure of control, and therefore may be open to prosecution.

The failure of the Regulation to elaborate on the meaning of responsibility and control potentially leaves every franchisor exposed to responsibility to ensure franchisee compliance, and prosecution and liability if there is a failure by a franchisee to comply. Accordingly, the ensuing liability under the Act may attach to any franchisors with 20 or more corporate and/or franchised outlets in Ontario as the Regulation may deem them to be an owner or operator of those regulated food service premises even when they are in fact not the owners.

Franchisors and franchisees are independent contractors. It is reasonable to assume that each should be responsible for their own acts or omissions, and government should not be imposing liability on one person for the acts and omissions of someone else. Most people in our society would see that as unfair, and not in keeping with our traditions. That should apply equally to parties in an independent contractor licensing arrangement. From this perspective the Regulation is not helpful to the franchise community. However, it is unfortunately becoming increasingly common for governments to move in this direction.

The Act and its accompanying Regulation are intended to come into force on January 1, 2017.

If you have any questions about the Act or the accompanying Regulations, please contact Larry Weinberg or Frank Robinson at Cassels Brock.