It is no longer sufficient for a franchisor to provide prospective franchisees a generic disclosure document. Ontario courts have determined that disclosure documents must be customized to include specific material facts about the actual franchise being granted if such site-specific information is known at the time of disclosure.
If known at the time of disclosure, it is recommended that the disclosure document include the following: location of the business, territory granted to franchisee, lease arrangements, projected opening date, initial franchise fee, performance of the business (if an existing franchise location), demographic information about the location, and other material facts about the particular franchise being granted.
If such information is unknown at the time of disclosure, the franchisor should provide the information to the prospective franchisee by way of a statement of material change once it becomes known.
Nevertheless, in the event that the franchise location is unknown at the time of the disclosure, the disclosure document should include a description of the general site-selection process. Similarly, in the event of a pending head lease, the franchisor’s disclosure document should include a description of the general process of the franchisor securing the head lease.
