Would it be better to have no legislation? That’s a no-brainer.

September 29, 2010

The public hearings that led to the Ontario Wishart Act (Franchise Disclosure), 2000 started on March 6, 2000.

  1. The first expert witness was Ms. Susan Kezios from the American Franchisee Association (her testimony, above to right).
  2. Mr. John Sotos was the next of the five expert witness (40 in total :: 4 days :: 4 cities) was a Toronto attorney called (his full testimony, left).

Mr. Tony Martin, a politician from Sault Ste. Marie  asked Mr. Sotos a question:

Mr Martin: Would it be better to have no legislation than to put a piece of legislation in that gives people a false sense of security, given some of the statistics?

Mr Sotos: That obviously is a no-brainer. The purpose of legislation is remedial, it’s to correct a problem. If the legislation doesn’t achieve that, then I think it’s misplaced.

“That obviously is a no-brainer.”

  • summum ius summa iniuria -  The more law, the less justice

Q: What will the grocers say to the politicians at the public hearings?

August 2, 2009

SecondOpinion

A: Whatever the fcuk I tell them to say.

This was my question to, and answer from, a Toronto, Canada lawyer before the hearings that lead up to the Arthur Wishart Act (Franchise Disclosure), 2000.

The real power behind established independent franchisee associations (IndFAs), is a handful of lawyers in North America.

All professionals will act so as to further and strengthen their current and future cash flows. This is not a huge insight.

But when the two objectives conflict (actually solving problems versus appearing to solve them) the professional’s needs are satisfied first because no one has the experience, knowledge or interest in challenging how the problem is framed.

Lawyers compel franchisees to deal with problems in the same way that denies the information/communication/internet revolution has ever happened. THINK: Would you want your doctor to treat you the same way the physicians did 100 years ago?

IndFAs never fulfill their potential because that would interfere with the dominant credence good providers’ interests (ie. the franchisee “Fixer” attorney). The credence good cheating problem is overcome by severing the attorney’s influence.

He is either allowed to do

  1. the diagnostic work (strategic planning) OR
  2. the proposed solution (actual litigation), BUT never both.

This helps to reduce the inherent conflict in being able to (1) frame the problem and (2) deliver the solution the the “problem”.

Any experienced IndFA executive knows that the lawyers have effectively captured almost all of the IndFAs. The litigation is a well-thought out puppet show between the industry’s legal titans.

  • This is the real reason that the American Franchisee Association is dormant: its attorney “supporters” want it that way.
  • Same why the AAFD so frequently put their foot into a warm pile of poo and lacks any credibility at all.

IndFAs are ineffective and usually deemed a “failure” because that  serves the most powerful stakeholders interests to do so.

The solution is to move toward a franchisee-centric model such as an Attorneyless franchisee network, AFN where no attorney can capture and disable the web-enabled massive power that franchisees have (Stewart’s Law of Group Power).

This is especially true when the franchisor is a publicly traded corporation in a mature industry that touches the public every day in a very intimate way in a rigid 24/7 product cycle.

The way out starts with one independent thinker asking for a 2nd opinion.


The Value of Knowing which questions to Ask

October 10, 2008

Frank Zaid is a Canadian lawyer with Osler, Hoskin & Harcourt LLP.

1. From his wikipedia page:

He has been listed as one of the leading franchise law practitioners in every published edition of the Canadian Legal Lexpert Directory, the Lexpert/American Lawyer Guide to the Leading 500 Lawyers in Canada.

In the 2005 and 2006 editions of Who’s Who Legal Frank was ranked as one of the most highly regarded franchise lawyers in the world, and as the most highly nominated practitioner outside of the United States.

In the 2006 edition of the Lexpert Legal Directory he was ranked as the most frequently recommended franchise lawyer in Canada and Osler was ranked as one of the most consistently recommended major full service law firms in franchising.

Further under Professional Affiliations:

  • American Bar Association (Forum on Franchising)
  • Canadian Franchise Association (Past General Counsel and past member of the Executive Committee and Board of Directors)

2. Mr. Zaid gave testimony before the Standing Committee on Regulation and Private Members Bills of the Legislative Assembly of Ontario on March 6, 2000 in consideration of Bill 33, Franchise Disclosure Act on behalf of the business law section of the Canadian Bar Association. This bill resulted in Ontario’s first franchise law, Arthur Wishart Act (Franchise Disclosure), 2000.

The Acting Chair (Hon. George Smitherman) exercised his discretion in allowing additional time for questions. I know this because I was in the Committee room listening very carefully to Mr. Zaid. I had just come back from lunch with Susan Kezios and John Sotos.

This is an excerpt from the transcript.

The Acting Chair: We’ve got a few minutes left for questions. We’ll start with Tony Martin.

Questions

Mr Martin: Certainly, your presentation flies in the face of some of the information presented to us, particularly this morning by Susan Kezios from the American Franchisee Association, who suggests other than that franchisor systems flee states where there’s good legislation. I suggest that maybe bad franchisors flee, and who would argue against that?

Were you the counsel for the Pizza Pizza franchisor?

Mr Zaid:
I was one of the counsels.

Mr Martin: Were you the counsel in the Bulk Barn case for the franchisor?

Mr Zaid: I’m involved in that.

Mr Martin:
You’re not the person who sent out the letters of threat to anybody who would intervene in any way in terms of that action?

Mr Zaid: I’m not going to answer that question.

Mr Martin: OK, thanks.

The Acting Chair:
Further questions? Seeing none, thank you very much for your presentation.

Full pdf download

The motto on the Legislature’s Coat of Arms, AUDI ALTERAM PARTEM, challenges the legislators to “Hear the Other Side.” Also note that the Mace (top and crossed on the Shield of Arms) is the traditional symbol of the authority of the Speaker of the Assembly.

Mr. Martin served as the Deputy Speaker of the House at that time. I had the great privilege of acting as a volunteer industry researcher to him.


Susan Kezios: one tough cookie

September 1, 2008

I had the great fortune of meeting Susan Kezios, the president of the American Franchisee Association in 2000.

She was brought to Toronto from their Chicago, U.S. offices to give expert witness testimony to the Ontario legislature Standing Committee on Regulation and Private Bills on March 6, 2000.

As you can see, Susan knows her stuff and is fearless in speaking her truth.

The American Franchisee Association was very important to me establishing the Canadian Alliance of Franchise Operators.

She is, however, not without a well-developed sense of black humour. As an example, this is how she left the 13 or so Canadian politicians and various industry hangers-on after her 45 minute “lively” chat about the state-of-the-union in North American franchising:

The Acting Chair: Thank you for your presentation. Safe trip home.

Ms Kezios: Thank you, especially with all the franchisors out there, right?


Tied buying creates a Hidden franchise fee

August 8, 2008

This is an interesting article from Kiwi’s Sunday Star Times.

Journalist Greg Ninnesson reports in Marriage made in Hell for upset pizza franchisees that some of Hell Pizza’s franchisees are not pleased with the new mandatory supply arrangements.

No wonder: A monopoly is bad for the whole economy because it leads to inefficient allocation of capital and unjustified profitability [economic rent] based in deceit.

A meeting of several dozen franchisees held in February expressed dissatisfaction with the supply arrangements for their ingredients and other goods.

Previously, each franchisee bought ingredients such as flour, cheese, meat and vegetables directly from independent suppliers on a contract basis.

But in February, TPF set up its own supply and distribution operation and its outlets were required to buy most of their ingredients through that.

The franchisees were concerned about the transparency of the new supply arrangements and the effect it could have on rising food costs.

Maybe forming an independent franchisee association would be a good first step. But you better chip in a few $1,000 each [to start] for the best franchisee-only lawyer you can find.

  • Compare the cost to a 1% increase in your Cost of Goods per year. [You don't honestly think this is the start of the blood-letting, do you?]

This is how I coded the article as it went into the Information Sharing Project:

  • Advertising fund put into general franchisor’s coffers,
  • Advertising fund use disagreements,
  • Franchisee revolt,
  • Franchisor owns more than one system (subsidizes loses from cash cow)
  • Gouging on supplies,
  • Monopoly,
  • Profits from one franchise system sucked out to subsidize another one,
  • Supply margins are a hidden added royalty payment,
  • Must buy only through franchisor (tied buying), and
  • Veil of secrecy.

Kickbacks, listing fees, volume discounts, co-op $, etc. are a beautiful thing to behold: If you are the franchisor.

  • Were you promised that volume buying through a franchise would actually save you money?

See the American Franchisee Association‘s, The Twelve Worst Franchise Agreement Provisions which include:

  • Sole Sourcing Requirements
  • Lack of Accountability of Advertising Fund
  • Kickbacks

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