Class-action lawsuits poised to make franchisors eat humble pie

January 20, 2011

Ontario justices are sending a strong message to franchisors to play nice when sharing profits.

Pet Valu, Midas, Shoppers Drug Mart, Quiznos, Tim Hortons, Bulk Barn, Sunoco…just the first.

The cases often revolve around how the franchisor uses its power to set the prices – both the prices that franchisees must pay for the products they sell, and how much they can sell them for.

“It’s about dividing up the profit pie. And the person who has the pie cutter is the franchisor. And so, they cut themselves the biggest piece,” Mr. Sterns said. “But on the other hand, the franchisees are the ones who put a lot of investment into making the pie.”

Mr. Shaw is absolutely right and absolutely wrong:

  1. The technology for organizing pre-trial franchisee groups is improving (daily) but
  2. This is just the tip of the iceberg.

I guarantee that.

[see Revolt of the Franchisee: Behind some of the biggest brands - Midas, Quiznos, Tim Hortons - the messy class-action battles or The Globe and Mail]


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.


NFC to AUS MPs: Contempt from the McContemptible?

September 17, 2008

The Franchise Council of Australia, FCA and it’s Chairman John O’Brien (CEO of PoolWerx Corporation, BTW), is right: Dead right.

  • The NFC seems to be acting AS IF it were the nation’s pique franchising body.

When I observe the recent interplay between AUS federal politicians and the NFC (see Franchise Council hits back at critics), I get a little teary-eyed.

It just seems like old times.

I am reminded of how the Canadian Franchise Association, CFA, dealt with a provincial politician called Tony Martin, who has since moved onto federal politics.

They treated Mr. Martin with contempt.

Tony and I worked together from 1998 top 2001, trying to get the 1st franchise law for investors in the province of Ontario in Canada. We failed to get a decent one and everything has been frozen since. (see Arthur Wishart Act (Franchise Disclosure), 2000, especially S3 and it’s pathetic, and still undefined and unargued, good faith provisions).

What we did succeed at (and in spades I might add) is leave a very interesting paper trail. The Information Sharing Project has collected all of these tasty little documents. Think of it as a www, digital record of very some very stupid comments.

As a example, please note Tony’s April 2000 press release below calling the Government of Ontario to investigate or “probe” the CFA.

Investigate Franchise Association Abuses: Martin
Tony Martin, MPP

April 4, 2000

TORONTO – The Consumer and Commercial Relations Ministry should investigate the Canadian Franchise Association over its failure to help Ontario franchise holders, NDP MPP Tony Martin said today.

The CFA is advising the Conservative government on proposed changes to provincial laws governing franchise agreements. But the association is under fire from hundreds of its own members for its indifference to their complaints, the NDP Critic for Consumer and Commercial Relations said in the Legislature today.

“The CFA has been of no help to many hundreds of entrepreneurs who lost their shirts in shoddy franchise deals,” Martin said. “Instead of taking the CFA’s advice this government should be sending in ministry staff to thoroughly investigate this association’s failures.”

Martin raised the case of Brenda Hope, a mother of two from Coldwater who lost $90,000 as a Chemwise Inc., franchisee. For more than a year, the CFA has refused to look into Hope’s complaints, although it endorsed Chemwise as a member.

Similarly, the CFA has refused to accept a registered letter from Bulk Barn franchisees who have a series of complaints against the franchisor. Martin was also refused when he tried to deliver the letter. The Sault Ste. Marie MPP called on Consumer and Commercial Affairs minister Bob Runciman to act now to protect small businesspeople.

“Perhaps the minister can convince the CFA to live up to its responsibilities to mediate franchise disputes. If he can’t, we need a full-scale probe of this group. It’s the least we can do for hard-working families who lose everything in dubious franchise deals,” Martin said.

The MPP has proposed his own legislation, Bill 35, that is far tougher than the government’s Bill 33. The Martin Franchise Bill would require full-disclosure of franchise contracts, a dispute resolution mechanism, the right to associate and the freedom to source products outside of the chain when not trademark related.

-30-

Information: Gil Hardy at (416) 325-7118 or Robin Cantin at (416) 325-7324
http://www.ontariondp.on.ca


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