Franchising continues to play a pivotal role in Ontario’s business landscape. From fast food outlets and fitness centres to tutoring services and home maintenance companies, franchising provides a proven model for entrepreneurs who want to operate their own business under an established brand. At the same time, franchisors benefit from network expansion with lower capital outlay and operational risk.
However, as the economy evolves and consumer expectations shift, franchising in Ontario faces both new challenges and significant opportunities. Legislative changes, economic volatility, the rise of digital commerce, and increased scrutiny of franchisor-franchisee relationships are all reshaping how franchise systems are structured and managed.
Both franchisors and franchisees need to understand the current legal framework and where the industry is heading. Ontario’s franchise sector is governed by the Arthur Wishart Act (Franchise Disclosure), 2000, but the legal and commercial environment surrounding that Act is becoming increasingly complex. This blog explores the future of franchising in Ontario, highlighting key challenges and emerging areas of opportunity.
The State of Franchising in Ontario Today
Ontario has a staggering concentration of franchise systems, with thousands of franchised businesses operating across a wide range of industries. The province’s large and diverse consumer base, strong service sector, and relatively franchise-friendly legal regime make it an ideal environment for both domestic and international expansion.
Franchising appeals to many Ontarians because it allows entrepreneurs to operate independent businesses with the support of a recognized brand and a developed operational playbook. Franchisors, for their part, can grow their market presence without assuming the full burden of site management or staffing.
Yet this model depends heavily on a balance of interests. When franchise relationships break down (often due to unclear expectations, unfair treatment, or economic stress), the legal consequences can be significant. Franchise litigation over issues such as disclosure compliance, termination rights, territorial encroachment, and post-termination obligations has become increasingly common in Ontario courts.
Legal Framework: The Arthur Wishart Act and Its Implications
Ontario’s Arthur Wishart Act governs the disclosure obligations and relationship standards between franchisors and franchisees. The Act requires franchisors to provide a detailed disclosure document at least 14 days before the franchisee signs an agreement or pays any fees. This document must include key information such as financial statements, background on the franchisor’s directors, litigation history, and all material facts.
Failure to provide adequate disclosure gives the franchisee a statutory right to rescind the agreement within two years and to claim damages. Ontario courts have interpreted the Act strictly, often ruling in favour of franchisees when disclosure is incomplete, misleading, or delivered improperly. Franchisors must stay vigilant to avoid the legal and financial fallout of non-compliance.
The Duty of Fair Dealing in Franchise Relationships
The Arthur Wishart Act also imposes a duty of fair dealing on both parties, a legal standard that extends beyond the contract itself. This requirement has been cited in cases where franchisors have been accused of acting in bad faith, such as terminating franchisees without cause, failing to protect exclusive territories, or refusing to approve reasonable transfers.
As the franchising sector matures, Ontario courts are being called upon more frequently to interpret these duties in light of emerging commercial realities, including e-commerce expansion and centralized digital marketing strategies that sometimes conflict with local franchisee interests.
Key Challenges Facing Franchising in Ontario
One of the most pressing challenges facing Ontario’s franchising sector is the changing nature of consumer behaviour.
The Rise of Digital Commerce
The COVID-19 pandemic accelerated the shift toward online and mobile ordering, subscription models, and contactless delivery, all of which present operational and legal questions for traditional brick-and-mortar franchises.
For instance, disputes have arisen where franchisors have introduced centralized ordering platforms that bypass the franchisee, diverting revenue or increasing administrative burdens. In some cases, franchisees argue that this violates their territorial rights or fundamentally alters the economics of their business model. Contracts drafted before the digital age may not adequately address these developments, leading to litigation or renegotiation.
Competition and Consolidation
Another challenge is the increased competition and consolidation within many franchise industries. Large franchisors are acquiring or rebranding smaller systems, and private equity investment in franchise networks is on the rise. These changes can destabilize existing relationships, especially when new ownership brings changes to fees, supply chain requirements, or operational standards.
Inflation and Operating Costs
Inflation and rising costs also pose a serious threat to franchise viability. Franchisees operating under long-term agreements with fixed royalty and advertising fees may find their profit margins no longer sustainable. Financial strain can lead to defaults, disputes, and franchise terminations without mechanisms for cost-sharing or price adjustments.
Franchising and Employment Law Pressures
In recent years, there has been growing debate over whether franchisees and their employees should be considered part of the franchisor’s “employer” network for the purpose of employment standards, human rights claims, and unionization. While Ontario courts have so far upheld the legal separation between franchisors and franchisees in most cases, labour organizations and some legal commentators continue to push for reforms that would impose joint liability.
If joint employer doctrines were ever adopted in Ontario, they could dramatically alter the risk profile of franchisors, particularly in large-scale food service and retail operations. Franchisors would face direct exposure to claims arising from wage disputes, harassment complaints, and terminations, even if they did not directly employ the affected individuals.
This issue also exists in other jurisdictions, including the United States, where the National Labor Relations Board has proposed rules to expand joint employer status. While Ontario has not moved in that direction yet, franchisors should be attentive to their level of control over franchisee operations, especially concerning staffing, scheduling, and workplace policies.
Technology, Innovation, and the Next Generation of Franchisees
Despite these challenges, the future of franchising in Ontario is far from bleak. Many new franchise systems are embracing innovation and adapting rapidly to changing market demands. Technology-driven franchises like mobile app development, digital marketing, home automation, and health tech services are gaining traction and attracting younger franchisees looking for scalable, flexible models.
Franchise systems that offer semi-absentee or remote ownership structures are particularly appealing to investors and professionals seeking supplemental income or career diversification. These models, often supported by sophisticated software, allow for centralized administration, data analytics, and targeted customer engagement.
Franchisors who embrace digital transformation, whether through online ordering, CRM platforms, virtual training, or integrated supply chain tools, will be better positioned to scale and attract tech-savvy entrepreneurs. However, these innovations must be integrated thoughtfully into franchise agreements, disclosure documents, and operating manuals to avoid legal missteps.
Social Entrepreneurship and ESG-Driven Business
A related trend is the rise of social entrepreneurship in franchising. Younger buyers are often drawn to businesses that align with their values, including an increased focus on ESG (environmental, social, and governance) considerations. Franchise systems that offer purpose-driven business models may find themselves at a competitive advantage, provided they are transparent and consistent in their brand messaging.
Opportunities for Growth and Legal Evolution
As franchising in Ontario continues to evolve, there are significant opportunities for growth, both for businesses and the legal professionals who support them.
Cross-Border Expansion
International expansion into Ontario remains strong, particularly among U.S.-based brands looking to enter the Canadian market. These businesses must carefully adapt their franchise disclosure documents, agreements, and operational protocols to comply with Ontario law.
Conversely, Canadian franchise systems seeking to expand across provincial or international borders must also navigate a patchwork of legal requirements. Franchising lawyers play a vital role in helping clients assess risk, protect intellectual property, and adapt to regulatory requirements in new jurisdictions.
Innovative Franchise Agreements and Dispute Resolution
There is also a growing need for modernization and flexibility in franchise documentation. Boilerplate agreements that do not reflect technological realities or evolving business models are increasingly giving way to more sophisticated contracts with tailored risk-sharing mechanisms, dispute resolution provisions, and innovation clauses.
Finally, the importance of dispute prevention cannot be overstated. As the number of franchising-related lawsuits in Ontario continues to rise, more franchisors are turning to mediation and arbitration clauses as tools to manage conflict. Proactively addressing potential points of tension, such as encroachment, marketing contributions, or performance standards, can preserve relationships and reduce litigation costs over the long term.
Franchising: A Business Sector in Transition
Franchising in Ontario is at a crossroads. Economic uncertainty, technological innovation, and shifting regulatory expectations are transforming how franchise systems are built, managed, and enforced. While these changes present real challenges, they also create opportunities for brands to reinvent themselves, franchisees to explore new business models, and legal professionals to guide clients through increasingly complex territory.
For franchisors, the path forward lies in transparency, compliance, and adaptability. For franchisees, success will depend on careful due diligence, ongoing legal support, and a clear understanding of contractual obligations.
Willis Business Law: Providing Dynamic Franchise Law Services to Windsor-Essex Businesses
Whether launching a new system, expanding into Ontario, or revisiting existing documentation, franchising clients need counsel who can look beyond the paperwork and understand the broader forces shaping the industry. At Willis Business Law, our skilled business lawyers understand the obstacles faced by Ontario franchise owners. We create strategic, forward-thinking legal solutions that support clients’ business objectives and position them for entrepreneurial success. To book a consultation, please call (519) 945-5470 or contact us online.
