Tony Martin asks a few questions of the Canadian Franchise Association, CFA

Mr. Richard Cunningham spoke very professionally and accurately for the franchisor- and supplier-only association.

Mr. Tony Martin, MPP was a key player in asking the right questions which helped clarify how much contempt each stakeholder had for the democratic process. There were five expert witness spots in the 4 days of travelling public hearings that resulted in the Arthur Wishart Act (Franchise Disclosure), 2000. The subcommittee gave the CFA one of those slots.  The complete record of testimony can be found on WikidFranchise.org.

Questions

[...]
Mr Martin: I’m following up on the question that Richard [Patten, MPP] asked a few minutes ago in terms of who you’ve actually kicked out of the association. I’m led to believe that, in fact, you’ve only revoked the membership of one and that was Pizza Pizza. Is that correct?

Mr Cunningham: I’m not at liberty to say, I believe. That would be privileged information of the association and I don’t think it’s appropriate to make any of that public here.

Mr Martin: You’re not going to give me any numbers even?

Mr Cunningham: No.

Mr Martin: Then just to query as to the membership in your group and who you speak for, I’m led to believe that you have 220 out of about 1,300 franchise systems in the country. Is that correct?

Mr Cunningham: I don’t what the date of that paper is, but our franchise member list is just over 300 right now because some of our member companies, like CARA, for example, would have eight brand names.

Mr Martin: And 80 of your members are lawyers, accountants or consultants?

Mr Cunningham: Correct.

Mr Martin: Also there are some big systems-and we heard from one of them today-that don’t belong to your association. Do you have any auto dealers?

Mr Cunningham: No.

Mr Martin: Do you have any food stores?

Mr Cunningham: Yes.

Mr Martin: How many?

Mr Cunningham: One chain.

Mr Martin: Petroleum stations?

Mr Cunningham: Yes, Petrocan.

Mr Martin: What about hotels and motels?

Mr Cunningham: Yes, a number of them.

Mr Martin: You made a statement earlier about the information I shared with the committee that the perception out there is that there’s lower risk by going into a franchise than the independent small business route. I have a study that suggests that’s not the case that the incidence of failure in franchising is greater than in going the independent route.

Mr Cunningham: I don’t know your study so I can’t comment on it.

Mr Martin: It’s a study called Survival Patterns among Franchisee and Nonfranchise Firms Started in 1986 and 1987. I can give you a copy of the report. It was reviewed by Ms Susan Swift from our legislative research branch, and it’s actually quite interesting. It has a number of findings that I think maybe your association might find worth looking at because it challenges very seriously the contention-and I suggest it’s something that needs to be perhaps looked into further. If we’re offering franchising in the country as a more secure way to get into business, particularly in an environment where there are a lot of people who are being restructured and walking around with severance packages looking for someplace to invest them and they are thinking that franchising is a bit more risk-free than actually setting up an independent business, then we may be sending them down a road that will result in stories such as the ones we’ve heard over the last two or three days here.

Mr Cunningham: Can I respond to that?

The Vice-Chair: Go ahead, sir. We’re just about out of time here now.

Mr Cunningham: Even if these statistics are out there, and as people are being told that franchises are more successful than non-franchises, the disclosure is going to give them the information and the ability to contact people in the system. If they call up XYZ system and talk to 10 of the franchisees and they say, “I’m not allowed to associate,” “I’m not making any money,” “I’ve been in this business five years and I’ve lost money,” or “I’m not in the system any more because I lost my life savings,” I think that in itself is going to tell those people, regardless of what any statistics are, not to buy.

Mr Martin: The problem is, though, that a lot of the people that they should actually talk to have signed confidentiality agreements and they can’t talk.

Mr Cunningham: They wouldn’t be able to do that, though, with this disclosure legislation.

The Vice-Chair: Richard, thank you so much for your time today and for the presentation you left with us.

For Canadian franchisees, there’s gold in the hills of unfair industry practices.

The Ontario courts have put real teeth into the Arthur Wishart Act (Franchise Disclosure), 2000.

Common industry practices are more and more being considered unfair or offensive to right to associate. The Justices are willing to award real cash to improve the vulnerable partys’ practical plan for improvement (proportionality), access to justice, and behaviour.

One example is timothy’s Coffees of the World Inc.: $50,000 award for franchisor’s breach of good faith duty. How many franchisees are in your system?

However, these claims must be mined, extracted and refined most usually within a functioning, patient independent franchisee association, IndFA.

Franchisees need outside, non-legal help to learn about these matters. IndFA leadership needs to be nurtured and supported in the next-to-unknown franchise power area. There is a role for the elite franchisee bar that’s developing in  Canada but the cannot develop franchisees from the ground-up. For sustainable gains, franchisees have to do it themselves (but with some help).

This is what IndFA  business consulting is all about.

To nurture efficient and effective franchisee-led collective gold mining through patient negotiation and litigation, if necessary.

There was one glorious time when the truth about Big Franchising was revealed and recorded

Four days in 2000.

March 6, 7, 8 and 9.

Public hearings into the franchise relationship. Four days of traveling public hearings: Toronto, Sault Ste. Marie, Ottawa and London. Ontario, Canada. Traveling public hearing: extremely rare, if not unheard of, under the Mike Harris government.

Approved by the former Ontario  Minister Robert Runciman over a beer with Tony Martin at the Queen’s Park members’ bar. Two men who share a love of democracy as expressed in the Legislative Assembly of Ontario.

• 35 life stories told in 20 minute chunks to the Standing Committee on Regulations and Private Bill.
• 4 expert witnesses given 45 minutes (John Sotos lawyer, Susan Kezios franchisee expert, Dr. Gillian K. Hadfield scholar and Richard Cunningham franchisor advocate).
• and me, Les Stewart franchisee advocate.

I had the tremendous honour of traveling throughout Ontario as before these life stories were twisted into the Arthur Wishart Act (Franchise Disclosure), 2000. I seemed to have made an impression on the politicians.

Of the current MPPs (107), I know 29 of them. One Minister since I was 17 years old. 45 minutes from my house to their House.

It happened once.

It can happen again.

– The Legislative Assembly of Ontario, looking north to the main doors, University Avenue, Toronto Ontario

Hansard does not record standing ovations.

For what it’s worth…

The Acting Speaker (Mr. Jim Wilson): Pursuant to standing order 98, the honourable member has 12 minutes for her presentation.

HELENA JACZEK, MPP

Ms. Helena Jaczek: At the outset I would like to make sure that everyone knows that this bill, Bill 102, An Act to amend the Arthur Wishart Act (Franchise Disclosure), 2000, is co-sponsored by my colleague from Parkdale–High Park and my colleague from Parry Sound–Muskoka. I think that this type of collaboration is something our constituents expect of us. We know that in our ridings many people did not actually vote for us or our party and it is our duty to represent them in this House wherever we can. It has been certainly an interesting and very satisfying experience to work with my two colleagues on this particular bill.

I’d also like to recognize in the west members’ gallery some supporters of the bill: Les Stewart, the founder of the Canadian Alliance of Franchise Operators, and Detective Fred Kerr, the corporate fraud manager for York Regional Police’s major fraud unit.

…

The Legislative Assembly of Ontario
Toronto, Canada
September 23, 2010

• http://www.wikidfranchise.org/20100923-second-jaczek1
• http://www.ontla.on.ca/web/house-proceedings/house_detail.do?Date=2010-09-23&Parl=39&Sess=2&locale=en#P953_222324

After 10 years, the Ontario Wishart Act is getting a little tweaking

Bill 102 is important.

But what’s revolutionary is the way the Ontario courts are back-filling the Wishart Act with real umph.

This judge-made or case law is designed to modify franchisor behavior.

A $50,000 appeal award upheld for mental distress in a low-rent coffee joint?

I understand this is the 1st time a breach of good faith and fair dealing provision has triggered $ on its own. And it was accomplished by a non-”franchise bar” attorney in Ottawa, too.

I wonder…

– Queen’s Park, Toronto Ontario Canada: Home of the Legislative Assembly of Ontario

Fear mongering begins in Ontario Wishart Act proposed change

Some professionals hold fast to their word.

They continue to practice with integrity, dignity, grace and humour, often under extreme conditions.

If faced with insurmountable economic hardships, they choose to leave a field rather than sell-out their principles.

Bev Cline writing for the Globe and Mail attributes the following excerpt to a Sotos LLP partner:

Another concern is that franchisors will essentially be asked “to crystal ball gaze” into the future in creating the educational document, says Allan Dick, a franchise lawyer at Sotos LLP in Toronto. “Currently a franchisor has to disclose, through the disclosure document [as mandated by the Arthur Wishart Act], everything that is material to the opportunity,” says Dick. The disclosure document, he points out, “is not a ‘general’ document; it’s a very specific document for a specific opportunity for a specific franchise.”

So, in terms of the proposed educational document, Dick asks: “If the franchisee is relying on a franchisor who is being forced [in the educational document] to crystal-ball-gaze into the future, to provide information that the franchisor could not know, will this benefit the prospective franchisee?”

The point is that prospective franchisees’ immediate interest and goal is to “look for the best opportunity they can find to be successful in business,” says Dick.

The implied threat to politicians, always sensitive to job loss or creation, is in the last sentence.

In addition, if franchisors are held liable for predicting business prospects in an unrealistic way, says Dick, they may be reluctant to enter into certain markets in the first place.

In WikidFranchise, Risk #17 is 95 per cent of legal fees are paid by franchisors. The full article: before and after I had “Wiki-ed” it (eg. told a story through a case study risk analysis).

Who are you going to trust?

– Thanks to This Isn’t Happiness

The Grange franchise investigation stands the test of time

Samuel Grange, Q.C. and his 1971 “Report of the Minister’s committee on Franchises”: the Grange Report.

In 1970, the Honourable Arthur Wishart, W.C., M.P.P. (Sault Ste. Marie),  Minister of Financial and Consumer Affairs commissioned a public inquiry into referral sales, multi-level or pyramid sales, and franchises. He appointed Grange to head a public inquiry. The current Ontario law was named in 2000, specifically to point backwards in time to Grange’s independent recommendations.

Even after almost 40 years, Justice Grange cuts through the nonsense.

SUMMARY OF RECOMMENDATIONS

Franchises
1. Legislation is to apply to all industries and to all franchises within each industry
2. Prohibition against dealing in franchises except as provided
3. Franchisor to file prospectus setting forth detailed information on scheme
4. Franchisee to have compulsory 48-hour cooling-off period before execution of agreement
5. Franchisee to have right to apply to Tribunal or Court to determine,
(a) whether contract is fair; and
(b) whether conduct of franchisor is fair in circumstances
6. Tribunal or Court to discourage following:
(a) arbitrary termination
(b) arbitrary refusal of assignments or renewals
(c) arbitrary forfeiture of deposits
(d) forced purchases and secret profits
(e) competitive and discriminating practices by franchisors

General
1. The formation of a separate branch of division with its own Registrar to administer multi-level and franchise matters.
2. Control of advertising
3. Regular renewal of permission to operate to be required
4. Suspension and cancellation of permission to operate
5. Regular inspection of records
6. Provision for escrow of investments or fees to protect investors and franchisees
7. Application of legislation to leases as well as sales

– Full Report

It is my impression that the current Ontario judiciary is on same frequency as was retired Appeal Court Justice Grange.

York University’s Osgoode Hall Law School Alumni Association Honours Three Outstanding Members of the Legal Profession

The public Role of Tier 2 franchise attorneys

In my post On the Nature of Tyranny, I tried to present Northrop Frye‘s analysis of William Blake.

Blake saw the fundamental struggle on earth between two opposing forces:

1. champions of tyranny (not the apparent nasties but those that profit from defending them; those that write for power; sophists) and
2. visionaries (the “enlightened ones” lol).

Franchise bar: In advanced franchising cultures, there are two archetypal fixers: one for the franchisors and ditto for franchisees.

Everyone else in the franchise bar is lower status individual, dependent on these two alpha males and the evolution of the bar’s sociology: norms, history, rewards/punishments, career advancements, access to law makers/regulators, referrals, who is “us” and who is “them”,  etc.

One role of the Tier 2 attorneys is to engage in battles on behalf of the pack when here is a threat.

Their out-of-character behavior explains a lot about a system that created, empowers and defends tyrants.

So Ontario, Canada is a worldwide franchise industry outcast? Okay then…

Peter Dillon of Siskinds LLP is an expert in franchise law and a practicing franchise lawyer.

In this month’s  edition of Canadian Lawyer magazine an article entitled Ontario courts side with franchisees, Mr Dillon is quoted as believing:

…franchise law and its judicial interpretation by the courts of Ontario has created probably the most perilous jurisdiction in the world in which to conduct franchises,”

The Wishart Act and its appeal court justices have created the “most perilous jurisdiction in the world“?

Mr. Dillon is reported as having sent out this warning:

He concludes his memorandum by advising his franchisor clients that the courts have clearly demonstrated they are favouring the franchisees, which therefore “creates a high degree of risk and uncertainty that will put some franchisors out of business and will deter many others from commencing to do business through franchising.”

Taking it further, he’s quoted as having:

…spoken to many U.S.-based franchises “that want nothing to do with Ontario. In an era where franchising plays a large part in our retail economic engine, it’s a shame to have mechanics at work that seem bent on lowering the horsepower or spiking the engine altogether.”

These are not the first unsubstantiated claims made in rejection of even the most tepid legal franchisee protection provisions nor will they be the last.

Just simply the next new article I added to the WikidFranchise collection.

Trust in franchising? What a concept

Two people I trust in franchising.

I need to check in with the second next month although everyone has their role to play.

• First expert witness, March 6, 2000, Toronto, Canada.

Resulted in the Arthur Wishart Act (Franchise Disclosure), 2000. Thanks to Bob Runciman who has gone onto his just reward.

BTW: This may be cryptic, but it is not unnecessarily so.

Some information requires care in transmitting and must be done in person. Words can hurt but iIf you don’t understand, that’s okay.

Trusting yourself enough to choose who to trust is 99% of the solution.