Specific Provincial Legislation Affecting Franchising

• Author: Frank Zaid
• Profession: Senior Partner Osler, Hoskin & Harcourt LLP
• Pages: 221-249

A.PROVINCIAL LIQUOR LICENCE

LEGISLATION

1)Summary of Legislation

The licensing of liquor sales in Canada is governed by provincial stat-

utes that may restrict a franchisor’s ability to collect royalties based on

gross sales that include liquor sales.

There are no specif‌ic legislative prohibitions or restrictions on the

payment of royalty fees based on liquor sales in the following prov-

inces: British Columbia,1 Saskatchewan,2 New Brunswick,3 Prince Ed-

1The governing stat ute in British Columbia is t he Liquor Control and Licensing

Act, R.S.B.C. 1996, c. 267, as amended.

2The governing stat ute in Saskatchewan is t he Alcohol and Gaming Regulation

Act, 1997, S.S. 1997, c. A-18.011, as amended. Se ction 58(1)(a.1)(i) of the Act

requires t he liquor licence applicant to state in a st atutory declaration t hat the

applicant is the “ow ner or lessee of the premise s to which the permit relate s.”

This provision h as been interpreted by t he Liquor and Gaming Licensi ng Com-

mission so a s not to prohibit the owner of a l icensed business fr om entering into

an agreement whereb y a percentage of gross sales, i ncluding sales of liquor, is

payable to another p arty.

3The governing stat ute in New Brunswick i s the Liquor Control Act, R.S.N.B.

1973, c. L-10, as amended.

CHAPTER 6

SPECIFIC PROVINCIAL

LEGISLATION

AFFECTING

FR ANCHISING

221

FRA NCHISE LAW222

ward Island,4 and Newfoundland and Labrador.5

In other provinces, liquor licensing legislation affects franchise

agreements that provide for the payment of royalties on gross sales,

which include the sale of liquor, either expressly in the legislation or by

implication, where the licence applicant is required to provide a copy of

the franchise agreement to the regulatory authority when the applicant

applies for the liquor licence. These provinces include Alberta (where a

copy of the franchise agreement must be included w ith the liquor licence

application), Manitoba (where only 10 percent of prof‌its may be from the

sale of liquor), Ontario (where if the licence holder receives 15 percent

or more of its gross revenue from liquor sales then the Regi strar may re-

view the franchi se agreement), Quebec (where the franchisee must f‌ile a

copy of the franchise agreement with the liquor licence application and

the Board must be persuaded that the franchisee is independent of the

franchisor), and Nova Scotia (where unless the Board otherwise directs,

a licence holder must not pay money under any agreement that varies

directly or indirectly with the volume of liquor sales and a copy of the

franchise agreement must be f‌iled with the Board). The legislation in

these provinces is discussed in greater detail below.

a) Alberta

The Gaming and Liquor Act6 includes a provision in section 65(1) that

provides: “[n]o person may enter into an agreement in which one part y

is to receive remuneration for working in licensed premises if the re-

munerat ion varies with t he amount of liquor sold at the licensed prem-

ises.” This provision has been interpreted by the Commission to apply

only to individual employment contracts. The Commission’s policy is

to require franchise agreements to be submitted and reviewed when a

franchisee applies for a liquor licence.

b) Manitoba

The governing statute in Manitoba is the Liquor Control Act,7 the provi-

sions of which are interpreted by the Licensee Field Manual.8 Section

62 of the Act provides:

4The governing stat ute in Prince Edward Isla nd is the Liquor Control Act,

R.S.P.E.I. 1988, c. L-14, as amended.

5The governing stat ute in Newfoundland and Labr ador is the Liquor Control Act,

R.S.N.L. 1990, c. L-18, as amended.

6R.S.A. 200 0, c. G-1.

7R.S.M. 1988, c. L160.

8Licensee Field M anual, Manitoba Liquor Control C ommission, April 200 4

[Manual].