Injunctions in the Franchising Context: Comparing the Canadian and American Systems

Franchisors often seek injunctions to enforce non-competition and other covenants contained in their franchise agreements, sometimes during but most often after the end of the franchise relationship. A common example is an injunction to enforce a covenant in which the franchisee contracts to not compete in a similar business for a specified period of time and within a specified geographic area. If successful, the moving party-franchisor is granted an injunction forcing the former franchisee to abide by its contractual obligations for the specified time period. Given the time it generally takes to reach trial, the non-competition clause often will expire before the trial occurs. As such, a successful interlocutory injunction motion often will finally decide the issues for the franchisor, rendering the trial moot. Given this reality, parties frequently settle after a successful interlocutory injunction, or the case may be abandoned after an unsuccessful one.

Recognizing the key role played by injunctions in franchise litigation, this article contrasts the procedures and, to a lesser extent, the substantive arguments used to obtain an injunction in Ontario and the United States. For simplicity's sake, the authors have chosen to focus on the Ontario provincial courts and the U.S. federal court system. While all of the other provinces, the Canadian federal government, and all of the U.S. states have some analogous procedures, a full discussion of the nuances of the laws in each such jurisdiction is beyond the scope of this article.