Obtaining A Release When A Franchise Has Gone Sour

In March, the Ontario Superior Court of Justice released its decision on a motion for summary judgment in Dodd v. Prime Restaurants of Canada (Prime).¹ The decision offers further insight into how the courts will apply the new summary judgment rules in the franchise context and raises some interesting issues regarding the interaction between Section 11 of the Arthur Wishart Act (Franchise Disclosure) (AWA) and a mutual release agreement executed by a franchisor and a franchisee in the context of a failed franchise.

The dispute in this case arose between the owner of East Side Mario's and two of its franchisees. In 2003, the parties entered into an agreement to open a new East Side Mario's franchise in Toronto. Almost immediately after opening its doors, the venture began losing money and the franchisees fell behind on rent, royalty and financing payments. After one year, the franchisees made a voluntary assignment in bankruptcy and the franchisor took over operation