Franchisor-Friendly Motions Results (British Columbia And Manitoba)

Recent summary judgment decisions in Manitoba and British Columba affirm two key principles. First, while the definition of "franchise" is broad, it has been interpreted to exclude situations where the alleged franchisor did not provide significant assistance to the alleged franchisee. Second, the courts have continued to affirm the principle that parties who agree on the terms of a termination will generally be held to those agreements, and a refusal to extend time for performance on its own will not constitute bad faith. Franchisors who act reasonably and keep careful documentation will continue to have an advantage in either of these situations.

"Significant assistance" a crucial aspect of the franchise relationship - Diduck v Simpson, 2018 MBQB 76

In 2015, Robert Diduck entered into a distributor agreement with Narol Professional Services Ltd., which identified itself as the "master distributor" of Sure Step Distributorship Program. Sure Step is a product manufactured by Interlake Chemicals International Limited. Upon entering into the distributor agreement, Diduck paid $24,750, was assigned an exclusive sales territory and provided with some training.

The business relationship did not go well. Diduck sued Narol and Interlake for breach of the distributor agreement, negligent misrepresentation and a franchise claim.

Diduck sought summary judgment against the defendants on the ground that the distributor agreement was, in fact and law, a franchise agreement, and that Interlake failed to provide him with the required disclosure documents under the Franchises Act (Manitoba). Accordingly, Diduck purported to have rescinded the agreement. In response, Interlake sought summary judgment on the basis that Diduck's negligent misrepresentation claim must fail.

The Court dismissed Diduck's motion, finding that, although certain aspects of the definition of "franchise" were met, the company did not offer significant assistance in Diduck's method of operation under a business plan, nor did it provide location assistance. In determining whether the distribution agreement was a "franchise agreement," the Court relied heavily on the Canadian Franchise Guide. Even though Diduck was assigned an exclusive territory and was provided with some cursory training (factors in favour), the Court held that this did not amount to the provision of "significant assistance" required by the Franchises Act (Manitoba), nor did assigning him a sales territory did not...