$50,000 franchisee award: mental distress caused by the franchisor’s bad faith dealings

A recent Ontario appeal court decision is very important for every Canadian franchisee.

On September 16, 2010 the Ontario Appeal Court confirmed a $50,000 award for mental distress.

First time ever. Read it here:

Suddenly the economics of pleading good faith has tipped significantly in franchisees’ favour, not just in Ontario but beyond Canada as well..

Some systems have 50, 100 or 1,000 franchisees.

You do the math of the aggregate value of a group or class action lawsuit.

You still need protection against choosing the wrong attorney but great news this fall.

Kudos: First franchisee call-out on internet:

Jeff Lefler, National Bread Network, October 21, 2010

[full chronology on Blue MauMau]

4 Responses to $50,000 franchisee award: mental distress caused by the franchisor’s bad faith dealings

  1. Ray Borradale says:

    I see Salah as incentivizing best practice especially when the math is applied.


  2. Carol Cross says:

    This was an interesting case that demonstrates the arrogance of franchisors and their disregard for fairness and good faith when dealing with franchisees.

    The decision of the court that was affirmed by the higher court is probably a shock to the franchisors who have always been able to use the adhesive and onerous contracts to commit bad faith acts.
    It is good that the judges have made this “good faith” case law that may provide protection for Canadian franchisees in the future when the franchisor breaches the terms of the contract.

    Of course, the “bad faith” demonstrated when franchisors sell franchises with high failure rates and low profitability and don’t disclose this to the new buyers of the franchise is still not being addressed by the government or the courts?

    Or is it being addressed? Doesn’t the Wishert Act imply that all material information must be disclosed to new buyers by the franchisor?



  3. Ray Borradale says:

    One of the biggest problems in franchising is the inability of franchisees to access remedy. Heavily funded franchisors have played that card well to ensure legitimate complaints are minimized.

    That makes affordable and speedy access to remedy something to be feared. It would not cure all but an authority handing down balanced decisions would see much of the franchisor ‘courage’ wilt.


  4. Carol Cross says:

    Yes, Ray! The model, itself, premeditates that the franchisee will deal one-on-one with the franchisor whose onerous contract and superior position and finances will almost always ultimately silence the franchisee who has put everything at risk and who loses all of it.

    If there was speedy and affordable access to remedy for franchisees, this, of course, would make franchisors more cautious about the worst abuses but they would still try to control the forces of remedy within the government.

    When the business model and the contract permit the franchisor to earn profits even as the franchisee makes no profits and struggles to survive, the incentive to exploit franchisees is always there —the gun is always loaded

    When the law and the law of the contract treat the franchisee as only an expendable resource of the franchisor, the systemic abuse of franchisees is possible and probable.

    Only when franchisees are organized as a system will they gain any power to engage the franchisor in fair bargaining and fair practices —but franchisees don’t understand this –until, generally, it is too late to remedy their situations.



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