Franchise Review Oct 2013 - Frequently Asked Questions: Can I use my U.S. Franchise Disclosure Document in Canada?

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The franchise legislation of Alberta, Prince Edward Island, New Brunswick and Manitoba each contain a provision permitting delivery of a document prepared for another jurisdiction, provided that it is supplemented with any information that is needed to comply with the applicable province’s disclosure requirements.

The reality, however, is that U.S. franchisors usually need to prepare a new FDD for use in Canada as a result of the differences between the disclosure requirements in the regulated Canadian provinces and these requirements in the United States (e.g., prescribed statements, franchisor’s associates, working capital estimates, advertising fund, trade-marks, financial performance representations, list of franchisees and closures, financial statements), the Canadian requirement to include “material facts” (i.e., a fact that would reasonably be expected to have a significant effect on the value or price of the franchise or the decision to acquire the franchise) and the differences between the Canadian franchise offering and the U.S. offering (e.g., different franchisor entity, fee structure/currency, trade-marks, governing law).

On the bright side, while there are minor differences among the five franchise statutes in Canada, the statutes are similar enough to make the creation of one national disclosure document for use in all the provinces possible. In most cases, Canadian franchise counsel can also leverage much of the information in the franchisor’s U.S. FDD, thus reducing the time and expense of creating the Canadian FDD, so the U.S. FDD is still of some use in Canada.