Franchisor's Associate

The Arthur Wishart Act (Franchise Disclosure), 2000 does not stop at the corporation that signs the franchise agreement. Section 1 defines a franchisor's associate as a person who meets two tests, and both must be met:

For corporations, section 1(3) deems control to exist where voting securities carrying more than 50 per cent of the votes for electing directors are held, other than by way of security only, and those votes can elect a majority of the board. An individual can also be an associate, as the Court of Appeal confirmed in 2022.

The concept is built into the Act's foundations: a payment to an associate can satisfy the franchise definition, and an agreement between an associate and a franchisee can be a franchise agreement.

Associates appear throughout the Act's remedies:

• Rescission payouts. Section 6(6) requires the franchisor, or franchisor's associate, as the case may be, to refund money, buy back inventory, supplies and equipment at the price the franchisee paid, and compensate the franchisee's losses within 60 days of an effective rescission.
• Misrepresentation damages. Section 7(1)(d) gives a franchisee who suffers a loss from a misrepresentation in the disclosure document or a statement of material change, or from any failure to comply with section 5, a right of action against the associate. Reliance on a misrepresentation is deemed.
• Right to associate. Section 4 binds associates as well as franchisors, with a damages action under section 4(5).
• Joint and several liability. Section 8 makes those found liable under sections 3(2), 4(5) or 7(1) jointly and severally liable, so a franchisee can collect the full amount from any of them.
• No waiver. Section 11 voids any franchisee waiver of an obligation the Act imposes on a franchisor or its associate.

The disclosure document must also report on associates. O. Reg. 581/00 requires statements about fraud convictions, franchise or business-law penalties and civil misrepresentation findings involving the franchisor's associate; see the franchise disclosure document page.

An individual can be personally liable by two routes. The statute reaches them directly, so a franchisee does not need to pierce the corporate veil.

As an associate. In 2483038 Ontario Inc. v. 2082100 Ontario Inc., 2022 ONCA 453, franchisees of a Fit for Life restaurant in Oakville rescinded because the disclosure documents had no signed and dated certificate. Samuel Davis, the franchisor's sole director, officer and shareholder, controlled the franchisor and had signed a page following statements that promoted the franchise as an investment. The Court of Appeal upheld the finding that he was directly involved in the grant by making representations on the franchisor's behalf, rejected an argument that the representations had to be made directly to the franchisee, and upheld a section 6(6) order of $475,909.26 against both the franchisor and him.

As a signatory. Section 7(1)(e) gives a separate right of action against every person who signed the disclosure document or a statement of material change. O. Reg. 581/00 requires the certificate to be signed by at least two officers or directors where the franchisor has more than one. In Mendoza v. Active Tire & Auto Inc., 2017 ONCA 471, the Court of Appeal said those who sign are personally responsible for the accuracy and sufficiency of the disclosure document, backed by personal liability to the franchisee.

Section 7 provides defences. Anyone can rely on proof that the franchisee knew of the misrepresentation; a person other than the franchisor can also escape liability by proving, for example, that the document was given without his or her knowledge or consent and that prompt written notice followed. Our page on directors' liability covers the wider picture for Ontario directors.

Two more categories of sellers face section 7 claims without being associates:

• A franchisor's broker is a person, other than the franchisor, its associate, its agent or a franchisee, who grants, markets or otherwise offers to grant a franchise, or arranges for its grant. Franchise sales organizations hired to place units fit this description.
• A franchisor's agent is defined in O. Reg. 581/00 as a sales agent of the franchisor, engaged by the franchisor's broker, who is directly involved in granting a franchise.

Neither needs a control link to the franchisor, but both can be liable for losses caused by disclosure misrepresentations or failures, subject to the section 7(5) defences. A person who has expressed interest only to a broker is still a prospective franchisee under the Act, so the disclosure timing and any earnings projections a broker shares need the same care as material from head office.

The breadth of the definition is contested. In a December 30, 2024 letter to Ontario's Minister of Public and Business Service Delivery and Procurement, the Canadian Franchise Association's first recommendation was to limit the definition of franchisor's associate to exclude true or mere employees and entities unaffiliated with the franchisor. As of October 2026, no amendment has been made; the Act's consolidated text has been unchanged since September 1, 2020.

The concept is spreading rather than shrinking. Saskatchewan's Franchise Disclosure Act, in force June 30, 2026, uses the same two-part definition and lets franchisees sue associates for disclosure misrepresentations; see franchise legislation in Canada.

For franchisors and their owners, associate exposure is managed through structure and process:

• Map the group: which entity owns the trademarks, which approves franchise sales, which collects royalties or supplies product, and who controls each one.
• Keep sales statements inside the disclosure document, and make sure anyone presenting to prospects, including brokers, works from it.
• Have the certificate signed by the officers or directors the regulation requires, after they have actually reviewed the document.
• Expect a foreign parent that approves Ontario grants to be an associate; our article on US franchisors expanding into Ontario covers that structure.
• Check a draft package with Lamba Law's free FDD Readiness Checker before it goes to a prospect.

Northfield Salad Franchising Inc. of Markham is wholly owned by Northfield Holdings Inc., which owns the trademark, collects the royalties and, through its owner and president Paolo Bianchi, approves every franchise sale. Paolo and his business partner Harleen Bains are the franchisor's only directors and sign its disclosure certificate.

Esther Castillo buys a Richmond Hill unit in 2025, paying a $35,000 franchise fee and $280,000 for the build-out. The disclosure document includes a chart of average unit sales of $910,000 without saying that it reflects only three corporate stores in high-traffic malls. Her unit reaches $520,000 in its first year and closes after 14 months.

Her lawyer's section 7 claim names the franchisor; Northfield Holdings, which controls the franchisor and approved the grant; Paolo, as an associate who indirectly controls the franchisor and approved the sale, and as a signatory; and Harleen as a signatory. The franchisor has less than $50,000 in its bank account, but section 8(3) makes every defendant found liable jointly and severally responsible, so if her claim succeeds, Esther's recovery need not depend on the franchisor's thin balance sheet.