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Ontario to Permit Electronic Delivery of Franchise Disclosure Documents Starting July 1, 2016

Published: 06/17/2016

By Larry M. Weinberg, Frank Robinson

The Ontario government has finally heeded the call of the franchise law community and, on June 16, 2016, announced that Ontario will permit electronic delivery of a franchise disclosure document (FDD). The new Regulation permitting electronic delivery takes effect on July 1, 2016.

This is obviously good news for those offering franchises in Ontario. It ends the uncertainty as to whether electronic disclosure was or is permitted, as at least one case in Ontario had noted that a FDD was deficient for having been delivered by electronic means.

The new Regulation will now bring Ontario’s FDD delivery practices in line with three of the other regulated provinces that explicitly permit electronic delivery, namely Manitoba, New Brunswick and Prince Edward Island. It leaves Alberta as the sole province with a franchise law that does not explicitly permit electronic delivery. As well, the province of British Columbia has a pending franchise law that, once in force (likely in early 2017), will permit electronic delivery.

A particularly important feature of the Regulation that permits electronic delivery of the FDD is the explicit requirement that the franchisor receives a written acknowledgement of receipt from the prospective franchisee. While requiring a receipt has always been a recommended practice whenever an FDD is provided, there was never any actual legal requirement in the Ontario franchise law for a franchisor to insist on a getting a written receipt from a prospective franchisee where a copy of the FDD had been delivered in hard copy form. So, where electronic delivery is made, a written receipt is now a legal requirement.

Other parts of this new Regulation also make it clear that a FDD and a Notice of Rescission under the law can be delivered by courier. It has always already been a common practice to have a FDD delivered by courier. But now it is expressly permitted.

With the changes, there are four permitted methods of delivery of a FDD in Ontario, namely:

1. hand delivery;
2. registered mail;
3. courier; and
4. electronic delivery.

As noted, while a written acknowledgement of receipt is now a condition of effective delivery by electronic means, it is recommended in all cases.

Due to the slight differences in the requirements relating to electronic disclosure across the regulated provinces, it can be perhaps be confusing and inefficient to modify a franchisor’s approach to disclosure from province to province. Accordingly, we can synthesize the regulations relating to electronic disclosure into a single set of rules that can be followed in each of the four provinces that permit electronic delivery (in Ontario, effective July 1, 2016).

The synthesized requirements are:

  1. The FDD must be in a form that enables the recipient to retrieve, view, store, print, and process the FDD.
  2. The FDD must be a single, integrated document or file (although Manitoba, New Brunswick and Ontario provide that if the FDD consists of separate files, then an index must be included which sets out the file name or a description of the subject matter of the file).
  3. The FDD must contain no external links to or from extraneous content or documents.
  4. A written receipt must be obtained from the franchisee.
  5. The franchisor must keep records of the electronic delivery.

As the exact wording of the Regulation is relatively short, it is set out in full below, and is as follows:

Part IV
Delivery of documents 

12. (1) For the purposes of subsection 5 (2) of the Act, a franchisor may deliver a disclosure document to a prospective franchisee by electronic transmission if,
(a) the document is delivered in a form that enables the recipient to view, store, retrieve and print it;
(b) the document contains no links to external documents or content;
(c) the document contains an index for each separate electronic file, if any, of which the document consists, where each index sets out,
(i) the file name, and
(ii) if the file name is not sufficiently descriptive of the subject matter dealt with in the file, a statement of that subject matter; and
(d) the franchisor receives a written acknowledgment of receipt from the prospective franchisee.
(2) A franchisor may deliver a disclosure document to a prospective franchisee by courier if the franchisor pays the costs of the delivery.

13. (1) For the purposes of subsection 6 (3) of the Act, a franchisee may deliver a notice of rescission by prepaid courier to the franchisor’s address for service in the franchise agreement.
(2) A notice of rescission delivered in accordance with subsection (1) shall be deemed to be delivered to the franchisor on the second day after the day of delivery by courier.

If you have any questions on these changes, please feel free to contact any of the authors, all members of the Cassels Brock Franchise Law Group.