BC Franchise Disclosure Failures and the Petition vs Action Problem: Rasheed v. Crust N Crunch Franchising Inc.
A franchise dispute that begins as a disagreement over disclosure obligations can quickly become procedurally complicated when the franchisee tries to rescind under the Franchises Act while the franchisor simultaneously pursues debt recovery in a separate action. Rasheed v. Crust N Crunch Franchising Inc., 2026 BCSC 1050, decided by Justice Gibb-Carsley on June 10, 2026, is a useful illustration of what happens when those two proceedings run in parallel and why BC courts will consolidate them rather than allow what the Court described as litigating in slices.
The decision addresses three matters of practical importance to franchisors and franchisees in BC: the scope of disclosure obligations under the Franchises Act, SBC 2015, c 35, particularly who qualifies as a "franchisor associate" requiring disclosure; the procedural risks of filing a petition alongside an existing action; and the circumstances in which BC courts will consolidate related proceedings rather than permit them to run separately. For an overview of how Achkar Law handles franchise disputes in BC, see our practice page.
Background: a franchise relationship that broke down quickly
The petitioners, Mr. Rasheed and his holding company, entered into a franchise agreement with Crust N Crunch Franchising Inc. on November 26, 2025, to operate a pizza and donair restaurant in New Westminster. The relationship deteriorated almost from the outset. The petitioners alleged they received inadequate training and support and that the franchisor micromanaged operations through CCTV cameras. The franchisor countered that the petitioners were operating the restaurant poorly and sent a formal warning letter on January 1, 2026.
On January 20, 2026, the petitioners served a notice of rescission under section 6 of the Franchises Act. They claimed that the franchisor's disclosure statement had failed to disclose that a person named Amanpreet Makkar, who the petitioners said held himself out as a co-director of the franchise, had ongoing civil proceedings against him. Their position was that Mr. Makkar's role was such that disclosure of his litigation history was required under section 5 of the Franchises Act and that the failure to disclose it entitled them to rescind without penalty.
The franchisor denied this characterization and filed a Notice of Civil Claim in February 2026 seeking recovery of the principal amount of $165,700 under a promissory note that formed part of the franchise arrangement. The petitioners counterclaimed asserting valid rescission and seeking a refund of amounts paid. They then filed a separate petition in March 2026 seeking a declaration that the rescission was effective. The franchisor applied to consolidate or stay the petition.
Justice Gibb-Carsley held that consolidation was required. The central factual question in the petition, Mr. Makkar's actual role in the franchisor's business and whether it triggered disclosure obligations, was heavily credibility-dependent and substantially overlapped with the issues in the action. Allowing parallel proceedings would risk inconsistent findings, duplicate evidence, and litigating in slices, which BC courts treat as contrary to the object of efficient and just dispute resolution.
The disclosure obligation under the BC Franchises Act
The Franchises Act, SBC 2015, c 35 imposes specific pre-sale disclosure obligations on franchisors. Under section 5, a franchisor must provide a prospective franchisee with a disclosure document before the franchise agreement is signed. The disclosure document must include prescribed information about the franchisor, its directors, officers, and what the Act defines as "franchisor associates," which can include persons who have a significant role in the franchise system even if they do not hold a formal title.
The rescission right under section 6 allows a franchisee to rescind a franchise agreement without penalty within 60 days after receiving the disclosure document if the disclosure did not comply with section 5. This is a powerful statutory remedy: it can unwind the entire franchise transaction and require the franchisor to refund all amounts paid, regardless of whether the franchisee has already commenced operations.
The petitioners' entire rescission argument rested on a single factual claim: that Mr. Makkar was effectively a co-director or "franchisor associate" within the meaning of the Franchises Act, and that his ongoing civil proceedings were therefore required to be disclosed. The petitioners said Mr. Makkar attended meetings, introduced himself as a co-director, and exercised significant control over franchise operations including directing staff through CCTV monitoring.
The franchisor flatly denied this. Its position was that Mr. Makkar was an employee or consultant in a food and operations role with no corporate authority, no directorial title, and no power to sign on behalf of the company or make corporate decisions. If correct, his civil proceedings were not required to be disclosed and the rescission notice was invalid.
Justice Gibb-Carsley noted that this factual dispute could not be resolved on affidavit evidence alone. The conflicting accounts of Mr. Makkar's role required a credibility assessment that affidavits are poorly suited to provide. This finding was central to the consolidation decision: a petition proceeding without oral testimony and cross-examination would not be able to produce a reliable finding on the core factual issue.
The petition vs action procedural risk
The petitioners' decision to file a petition after the action was already underway created the procedural problem the Court was asked to resolve. A petition is a summary procedure decided primarily on affidavit evidence and is designed for matters where the key facts are not seriously disputed. An action involving oral testimony, documentary disclosure, and examinations for discovery is the appropriate vehicle where credibility and factual disputes are central.
Running both simultaneously created four specific risks that Justice Gibb-Carsley identified as favouring consolidation:
Risk 1: inconsistent findings of fact
The petition and the action both required a determination of Mr. Makkar's role. If the petition judge and the trial judge reached different conclusions on the same factual question, the result would be legally incoherent. Two conflicting findings about Mr. Makkar's role in the same dispute would be difficult to reconcile and would create uncertainty that neither party could properly plan around.
Risk 2: duplication of evidence and proceedings
Substantially the same witnesses and documents would be needed in both the petition and the action. Requiring the parties to present overlapping evidence in two separate proceedings doubles the cost and judicial resources consumed without producing any additional clarity. Justice Gibb-Carsley specifically noted that the interactions between Mr. Rasheed, Mr. Rabiei, and Mr. Makkar would be central to both proceedings.
Risk 3: the petition would not resolve the action
Even if the petitioners succeeded on the rescission point in the petition, the action would still need to proceed to deal with the promissory note, the conduct of the parties in operating the franchise, and the other claims and counterclaims. Resolving the petition would not shorten the action in any meaningful way. The Court cited Moradi v. Whole Foods Market, 2026 BCCA 105, for the principle that litigating in slices is to be avoided.
Risk 4: affidavit evidence alone was insufficient
Following the BC Court of Appeal's guidance in Cepuran v. Carleton, 2022 BCCA 76, the Court considered whether hybrid procedures could be used to test affidavit evidence within the petition rather than converting it to an action. Justice Gibb-Carsley concluded that even a hybrid approach would not adequately resolve the credibility issue, and that given the action was already underway, consolidation was the more efficient path.
What this means for BC franchisors
The disclosure obligation question at the heart of this case is unresolved on the merits: Justice Gibb-Carsley explicitly declined to make any findings on Mr. Makkar's role, whether disclosure was adequate, or whether the rescission was valid. Those questions will be determined at trial. But the case raises important practical issues for BC franchisors that do not depend on the final outcome.
The first is the scope of "franchisor associate" under section 5 of the Franchises Act. A person who holds no formal directorial title but who is perceived by franchisees as exercising significant control over the franchise system may fall within the disclosure obligation regardless of how the franchisor has structured its internal arrangements. Where there is any doubt about whether a key person's role requires disclosure, the safer approach is to include the disclosure rather than assume it is not required.
The second is the importance of the disclosure document as a litigation document. In BC franchise disputes, the disclosure document is frequently the central exhibit. Its contents, what it includes and what it omits, determine whether the franchisee has a rescission right. Franchisors who treat the disclosure document as a compliance formality rather than a carefully considered legal document create the exact exposure that Crust N Crunch faces in this litigation.
Involved in a BC franchise dispute as a franchisor or franchisee, or concerned about whether your disclosure document meets the requirements of the Franchises Act?
BC's franchise rescission right is one of the most powerful statutory remedies available to franchisees. For franchisors, inadequate disclosure can unwind the entire transaction. For franchisees, the 60-day window to exercise the right runs from receipt of the disclosure document. Get legal advice on your position before the window closes or the dispute escalates.
Call: 1-800-771-7882 Get Advice on Your Franchise DisputeWhat this means for BC franchisees
For franchisees, the case confirms that the section 6 rescission right is a real and powerful remedy worth pursuing where the disclosure document was deficient. The fact that the petition was consolidated with the action rather than dismissed means the rescission argument survives and will be fully adjudicated at trial. The petitioners retain the ability to succeed on their rescission claim.
The procedural lesson for franchisees is equally important. Filing a petition after an action is already underway creates the risk of the petition being consolidated or dismissed on procedural grounds without any determination of its merits. Where a franchisee wants to pursue a rescission claim, the better approach is either to file the petition before the franchisor commences action or to advance the rescission as a counterclaim within the action from the outset rather than in a separate petition proceeding.
The 60-day window under section 6 of the Franchises Act runs from receipt of the disclosure document. Franchisees who believe their disclosure was deficient should seek legal advice immediately on whether the rescission right remains available and how to assert it most effectively given the procedural posture of any existing or anticipated litigation.
Franchise relationship breaking down in BC, or concerned about disclosure obligations under the Franchises Act?
Whether you are a franchisor assessing your disclosure document's adequacy or a franchisee considering whether to exercise the rescission right, the procedural and substantive decisions made in the early stages of a franchise dispute determine what options remain available later. Get advice before those decisions are made for you.
Get Advice on Your BC Franchise Dispute Or call us: 1-800-771-7882Practical takeaways
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Whether you are a franchisor who has received a rescission notice under the Franchises Act, a franchisee considering whether to exercise the rescission right, or a party to a franchise dispute that has already produced litigation, Achkar Law advises on franchise disputes in British Columbia. We will assess your position honestly and advise on the procedural and substantive steps that protect your interests before the situation deteriorates further.
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