How to Rescind a Franchise Agreement in Ontario After Signing

Signing a franchise agreement and then having doubts is stressful, especially once money has gone in. Ontario's franchise law gives some buyers a way out, but only where the franchisor's disclosure was late or deficient, and only within strict time limits.

This article explains the rescission deadlines under the Arthur Wishart Act (Franchise Disclosure), 2000, what a valid rescission can lead to, and the practical steps to take. Ordinary second thoughts are not a ground by themselves, so the details of your own package matter.

When rescission is available

Rescission means cancelling the agreement and being put back in your earlier position. Under the Act it is tied to problems with disclosure, not to simple regret. The franchisor must give you a disclosure document at least 14 days before you sign any franchise-related agreement or pay any consideration, and it must disclose any material change before signing or payment.

If that document or a material change statement is late or deficient, you can cancel without penalty within 60 days of receiving it (section 6(1)). A deficient document can include one missing the signed and dated certificate required by section 7 of O. Reg. 581/00, which the Court of Appeal for Ontario has treated as a fatal defect on its own.

The deadlines

The two-year period applies only where no disclosure document was ever provided. If you received something, even a poor document, the shorter 60-day period is the one to worry about, so do not wait.

Work out the date you actually received the document and count forward right away. If you are close to a deadline, speak to a lawyer immediately.

How to give notice

The way notice must be given, and what it must say, are details to confirm with a lawyer before you act. In general terms, you should put your decision to cancel in writing, deliver it in a way you can prove, and keep a copy. Do this well within the deadline rather than on the last day.

• Keep every document you received and note the date each arrived.
• State clearly that you are rescinding because of the disclosure problem.
• Use a delivery method that gives you proof of the date.
• Keep operating decisions, such as spending more money or signing a lease, on hold until you have advice.

What the franchisor must refund

After a valid rescission the franchisor has 60 days to return your money. You can also sue for damages for loss from incomplete information or misrepresentation.

In one Court of Appeal for Ontario decision, rescission under section 6(2) was upheld together with an order of $475,909.26 under section 6(6), where the disclosure document lacked the required certificate. That result depends on its facts and is not a promise of any amount for your situation. What you can recover depends on what you paid, what the franchisor must return and what losses you can show.

If the franchisor does not return your money in time, or disputes that the rescission is valid, you may need to take legal steps to enforce your rights.

What to do next

• Find out whether you ever received a disclosure document, and when.
• Compare the date you received it with the date you signed or paid; 14 days is the minimum gap.
• Check for the signed and dated certificate and for any missing required topics.
• Mark the 60-day and two-year dates on a calendar.
• Gather the agreement, payment records and all correspondence with the franchisor.
• Speak with a lawyer quickly about whether rescission fits your facts and how to give notice.

Other rights may exist too. Every party to a franchise agreement must act in good faith, and a breach lets the other party sue. A lawyer can help you weigh rescission against other options.

Frequently asked questions