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One of the key concepts in franchising is creating brand awareness and consumer confidence by ensuring the consistency of the products and services that are offered by each franchisee of a particular franchise system. For example, consumers expect they will be able to choose from the same menu items and dine in a similar atmosphere whether they are in a restaurant franchise's location in Vancouver or Toronto. Ensuring consumers have a consistent experience between franchises of the same system is fundamental not only to consumer confidence, but to the long-term success of the franchisor and each of its franchisees.

Despite the importance to both franchisees and franchisors of ensuring a consistent consumer experience, there are exceptions to consistency that arise due to certain practical and legal considerations. An example of this is that franchisors with franchises in foreign countries sometimes have no choice but to vary the products and services their foreign franchisees sell in order to address the obvious cultural and language issues that arise in operating a franchise in a foreign country.

In addition, there are also certain laws that impact the level of consistency that a franchisor can mandate between its franchisees. One of the most important areas in which this arises in Canada is with respect to the price at which products and services can be offered for sale to consumers.

The Competition Actis federal legislation that in general terms is meant to protect consumers in Canada from certain unfair business practices. Pursuant to the price maintenance provisions to the Competition Act it is an offence to attempt to influence upward or discourage the reduction of the re-sale price of a product or service. In particular, section 61(1) of the Competition Act provides:

"No person who is engaged in the business of producing or supplying a product, who extends credit by way of credit cards or is otherwise engaged in a business that relates to credit cards, or who has the exclusive rights and privileges conferred by a patent, trade-mark, copyright, registered industrial design or registered integrated circuit topography, shall, directly or indirectly:

(a) by agreement, threat, promise or any like means, attempt to influence upward, or to discourage the reduction of, the price at which any other person engaged in business in Canada supplies or offers to supply or advertises a product within Canada; or

(b) refuse to supply a product to or otherwise discriminate against any other person engaged in business in Canada because of the low pricing policy of that other person.

The impact of the price maintenance provisions of the Competition Act on franchising is of significant importance. Simply, a franchisor cannot mandate the price at which its franchisees will sell their products or services to the public. Such conduct by a franchisor is a breach of the price maintenance provisions of the Competition Act and will subject the franchisor to fines and even the possibility of imprisonment for up to five years.

Many upstart franchisors are surprised to learn about the price maintenance provisions of the Competition Act and its impact on franchising. In particular, they point out that many franchisors advertise sale prices for products sold from their franchise locations across Canada as evidence that franchisors mandate the price at which their franchisees sell products. While it is true that you will see advertisements of sale prices on products sold by each franchisee of a franchisor, franchisors will not mandate the price at which products are being sold by their franchisees. Rather, a franchisor will require its franchisees to sell a particular product at a price that does not exceed a certain amount. This is permissible because the Competition Act provides that it is not an offence for a franchisor to mandate a maximum price at which a product is sold as long as the franchisee is free to sell the product or service to its customers for a lower price.

The price maintenance provisions of the Competition Act also provide that a suggested retail price is not an offence if it is made clear to the person to whom the suggestion is made that he/she is under no obligation to accept the suggestion and that they will in no way suffer in their business relationship with the person making the suggestion if they fail to accept the suggestion. As a result, franchisors will often suggest retail prices at which their franchisees may want to sell their products, while clearly stating in the franchise agreement that the franchisee is under no obligation to accept the suggested price and that they will not suffer in their relationship with the franchisor if the franchisee does not accept the suggestion.

There is no doubt that good franchisors maintain consistency by creating and enforcing operational standards that are followed by each of their franchisees in operating their franchises. However, franchisors and franchisees must be cognizant that there are both practical and legal exceptions to consistency and operational standards. Experienced and successful franchisors have usually adapted their systems and operating procedures to ensure that they incorporate the necessary differences into how each of their franchises is operated.