CANADA Trends and Developments Contributed by: Melissa Cattini and Ahmed Malik, MLT Aikins
landscape and growing use of AI. Franchisors increas - ingly mandate specific systems including point-of- sale, automated customer service, booking engines or proprietary AI platforms for franchisees, to ensure the delivery of a uniform brand experience, consistent reporting and centralised data collection. While man - dated technology updates offer certain operational and competitive advantages, they also introduce cer - tain legal and adaptability challenges. A franchisor’s ability to mandate software and tech - nology adoption typically stems from the franchise agreement. However, not all agreements are explic - it. Broadly drafted or outdated provisions may not clearly authorise the franchisor to demand adapta - tion of newer or AI-driven technologies. Disputes can arise when mandated technology imposes significant costs, disrupts operations or offers uncertain value. Without clear contractual authority, franchisees may challenge the scope or legitimacy of a mandate, creat - ing conflict over cost allocation and feasibility. To manage evolving technology, agreements should permit both initial adoption and ongoing updates, upgrades and system overhauls. Still, sweeping system-wide changes, particularly those involving unproven technologies or major disruption, can face resistance. Franchisees may hesitate when costs are high, benefits unclear or changes undermine existing workflows and investments. Balancing innovation with fairness is critical. Franchisors must consider their duty of good faith and fair dealing, ensuring mandates are necessary, proportionate and demonstrably ben - eficial to the system. Franchisees also have a stake in system moderni - sation. Stagnation or uneven adoption risks dimin -
ishing brand competitiveness, while non-adopting franchisees can hinder overall system performance. Poorly planned or inequitable mandates can erode rather than enhance franchisee value. As technology becomes central to customer engagement, opera - tional decision-making and marketing automation, its role brings both opportunity and novel legal and management challenges. Addressing these issues requires well-drafted fran - chise agreements with clear contractual language, transparent rollout plans and cost-benefit justifica - tion. By engaging experienced franchise counsel to structure authority, manage implementation and align value expectations, franchisors can reduce disputes and maintain compliance. As technological innova - tion accelerates, a coherent and contractually sound approach to technology mandates is essential for sus - tainable franchise system growth. Conclusion Franchise law in Canada is entering an era of height - ened regulation, intensified scrutiny and rapid conver - gence of shifting economic trends with accelerating technological change. Legislative reforms and emerg - ing 2025 case law are reshaping disclosure obligations and compliance expectations for franchise systems nationwide. This environment ushers in conditions that reward agile, strategic and informed systems – those that adapt operations, sales strategies and technology use while embedding such changes into compliance practices across all jurisdictions. Proactive systems that seek timely legal and professional guidance will be best positioned to manage risk, maintain compli - ance and thrive amid the ongoing evolution in the fran - chise legal landscape.
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