Which shareholder enables the franchisee class-action game?

The informal franchisee leaders. The organizers. The “white knights”.

When the class-action fraud sausage explodes, You can’t really blame the lawyers for pandering to your lack of wholeness, wisdom, and confidence.

Can you?

Blue MauMau reports: Tim Hortons Franchisees Get Bum’s Rush at Annual Meeting

Annual meetings are supposed to be an opportunity for shareholders to communicate to management.

Exterior of the Tim Hortons coffee shop at the corner of Scott St. and Wellington St. East is photographed on March 3, 2017. (Fred Lum/The Globe and Mail)

It appears 3G Capital executives feel themselves above Ontario corporate law.

To wit… In the June 5th Globe and Mail article by Marina Strauss: Franchisees shunned at Tim Hortons parent company annual meeting

“Tim Hortons franchisees who traveled to Tim Hortons’ parent company Restaurant Brands International (RBI) annual shareholders meeting in Oakville, Ontario, Canada yesterday were in for a shock. CEO Daniel Schwartz, in an apparently highly unusual move at RBI or any other publicly held company, did an end run around them and ended the meeting without entertaining questions from anyone in the audience.

“I’m astounded,” John James (J.J.) Hoey, a franchisee in Mississauga and an organizer of the Great White North Franchisee Association, said later. The association was formed in March to speak for Tim Hortons restaurant owners and raise concerns about the effects of RBI’s cost-cutting.

…In an interview later, Mr. Schwartz said the company is in “constant dialogue with our restaurant owners. We’re always willing to speak with them.” — Marina Strauss, The Globe and Mail

But apparently not publicly at the shareholders meeting, for one.

RBI, controlled by Brazilian private equity firm 3G Capital, is quick to adopt its cost-cutting strategies at its acquired targets, a proven 3G strategy to rapidly boost profits.

…Peter Sklar, retail analyst at BMO Nesbitt Burns, said he was surprised RBI didn’t take questions from shareholders. “It’s unusual for investors not to have the opportunity to question management during the annual meeting,” he said. “I’ve never seen that before.” — Strauss, The Globe and Mail

RBI also owns Burger King and Popeyes.

Full article”

Blue MauMau.org is the premiere franchisee-focused news source.

Information is much, much more valuable to franchisees than any franchise law will ever be.

Start the dialogue, record the franchisor’s every move and retain that information through successive ownership changes.

Start educating  your members in the two businesses they run: the store and the franchise relationship.

I started WikiFranchise.org in Feb 2009. I keep it open although most wikis are closely held.

Those with a greater command of the information, wins every time.

• weblog
• smart phones
• wikis

 

What is an independent franchisee association?

Properly organized, even a small number of franchisees (6 to 12 of 1,000) can defend themselves extremely well.

Every franchisor knows that franchisees using the latest communication devices (see example) and the internet, can make even the most ruthless vulture capitalist turn tail.

An independent franchisee association is NOT:

• a bitch or social group,
• a lapdog franchisor-sponsored advisory board,
• a way to raise money for a “white-knight lawyer” to save you (only a fool falls for a legal-only approach),
• a cynical mechanism for over-entitled franchisee posers to feather their own nest, or
• a temporary or “knee-jerk reaction”.

It is a pragmatic re-investment in, for example, Tim Hortons’ franchisees, protecting their $1.8-billion in equity (3,600 stores times $500,000).

Without specialized training and experience, no franchisee has the time to learn what will and will not work.

It starts at some franchisee’s kitchen table with 2 other franchisees and me.

A man in debt is so far a slave.

When there is an Independent Franchisee Association present, most people figure that members are best split into two camps. Those that are:

1. members (pay their share) and
2. non-members (free riders).

[This mindset is the greatest obstacle to effective advocacy, btw.]

The only real, relevant differentiating factor is:

• those who are slaves (ie have a killer amount of DEBT) and
• free men; those little or no debt.

The behavior of franchisees has much more to do with their perceived debt load (v. than their character).

With enough debt, any saint becomes a sinner.

Guaranteed. 100%.

— Ralph Waldo Emerson (1803 – 1882)

Sterns’ warning: Don’t do a half-assed job on disclosure reviews

Ontario’s 35,000 lawyers should consider themselves warned.This is not just outstanding peer-to-peer legal advice (which it is: both carrot and stick) but it’s also crucial information for all current Canadian franchise investors.

The benefit of collective franchisee action has never been more justified.

David Sterns of Toronto’s Sotos LLP writes in March’s Canadian Lawyer magazine an article called: Advising the purchaser of a franchise business.

Sterns’ bottom-line advice to lawyers? (especially general attorneys):

The harsh reality is that some franchises have a failure rate as high as or even higher than non-franchised businesses. When the franchised business fails, the results are often catastrophic for the franchisee. The legal advice provided by the reviewing lawyer will come under close scrutiny, particularly if the franchisee misses the rescission window because it was unaware of its rights…

Lawyers should allocate sufficient time and charge a sufficient fee to permit a proper document review and reporting to the client. Otherwise, they should decline the retainer.

Lots of implications for the general and franchise Ontario bar.

But, hey, huge importance for the 40,000 ON investors in a current franchise relationships who are organized. Disclosure requirements are not just for the entering but whenever a material change happens to the relationship (ie. during, at renewal: any time a material or “significant” franchisor decision is made).

Did you get proper disclosure documents the last time your franchisor decided to change the rules in the middle of the game?

These are the business risks I assigned and that appear in the WikiFranchise.org entry:

1. Arthur Wishart Act (Franchise Disclosure), 2000, Canada,
2. Buying an existing outlet even riskier than from scratch,
3. Courts extremely picky about shoddy disclosure practices,
4. Disclosure documents are deficient,
5. Disclosure document: one, bound and delivered at the same time,
6. Disclosure document certificate,
7. Disclosure document must disclose all material facts,
8. Disclosure document must include third party contracts (suppliers),
9. Disclosure documents never given,
10. Disclosure documents not given within proper timeframe,
11. Duty of care,
12. Franchise law being ignored,
13. Independent businesses survive longer than franchised ones,
14. Independent businesses much higher profit than franchised ones,
15. Lawyer alert: advise only prospects with adequate legal due diligence budgets or risk being sued,
16. Lawyers being threatened with lawsuits for speaking out,
17. Material facts were not disclosed,
18. Outstanding advice,
19. Professional negligence,
20. Refuses to take client,
21. Rescission,
22. Sue the lawyer,
23. Unintentional or hidden franchises

This is an important article that I will visit again.

Go ahead and choose your executioner: call a franchise expert

Rules of franchise groups:

1. A dead association is worth more than an alive one.

2. The owner of the logo pays someone else if they cannot execute themselves. The hooded one is either the charming outsider or the loud insider.

3. Franchise lawyering insists on a quick kill rather than a future, recurring cash flow/life cycle.

4. As an association executive, you’ll go along with the game or become a defendant.

5. A token truth added, infinitely strengthens the Big Lie.

6. 99.5% of visible U.S. independent franchisee associations are Potemkin villages (valuable to the status quo as franchisee false hope, example: FranchiseeAssociationManagement.com).

7. Leaders act as a doctor would because franchisees are in a type of daydream. Democracy is a noble concept but achievable only when debtors break their chains.

8. There is a narrow path but it requires patience, self-reliance, trust and one franchisee.

Call for a meeting.