Rescinding a Franchise Purchase in Ontario: 60 Days and 2 Years

Some franchise buyers sign first and receive the paperwork later, or receive a thin package that leaves out important information. If that sounds like your situation, Ontario law may let you undo the purchase and get your money back.

This right comes from the Arthur Wishart Act (Franchise Disclosure), 2000. It is strong, but it is also tied to deadlines, so it helps to know which one applies to you and to act before it passes.

What disclosure the franchisor owed you

The franchisor must give you a disclosure document at least 14 days before you sign the franchise agreement or any related agreement, or pay any consideration. It must cover background, litigation and bankruptcy history, financial statements, offering costs, draft agreements, and current and former franchisees.

The information must be accurate, clear and concise. The franchisor must also disclose any material change before you sign or pay. Rescission rights come from failures in this process.

The two deadlines

The clocks run from different events. The 60-day period starts when you receive the document or statement, while the two-year period starts when you entered the franchise agreement. Pinning down exactly when you received each document, and what it contained, is often the first job.

What counts as late or deficient

Late means you did not get the document at least 14 days before signing or paying. Deficient means it is missing required content or is not accurate, clear and concise.

A disclosure document without the signed and dated certificate required by s. 7 of O. Reg. 581/00 has been held by the Court of Appeal for Ontario to be a fatal defect on its own. In that decision the franchisees did not have to show they were unable to make an informed decision, and the court upheld rescission under s. 6(2) and an order of $475,909.26 under s. 6(6).

That result turned on its own facts, and not every defect will be treated the same way. Whether the problem with your document is serious enough is a question for a lawyer who has read it.

What you can recover

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.

The size of any recovery depends on what you paid, what you lost and what the franchisor can show. Do not assume the full amount of your investment will come back, and do not assume the franchisor will agree. If it refuses, the next step may be court.

Cancelling this way is also different from simply deciding the business is not working. The right exists because of a disclosure failure, not because the franchise turned out to be hard to run.

What to do next

• Write down the date you first received any disclosure document and the date of every later document.
• Note the date you signed the franchise agreement and any related agreement, and the date and amount of every payment.
• Collect the disclosure package, the signed agreements, emails and anything the franchisor or its representatives said about earnings or costs.
• Check whether the disclosure document includes a signed and dated certificate.
• Stop and get legal advice before you take steps such as closing the location or withholding payments, because those can create new problems.
• Ask a lawyer how to give notice of rescission properly and to confirm which deadline applies to you.

If the 60-day window is already close, speak to a lawyer straight away. If you never received disclosure, you have more time, but evidence is easier to gather the sooner you start.

Frequently asked questions