There are consequences to driving wages down below a certain point.
Because you can do something does not necessarily mean you should.
The Canadian Franchise Association says it …advocates on behalf of franchisors and franchisees in Canada…
April 4, 2000
Investigate Franchise Association Abuses: Martin
Tony Martin, MPP, Sault Ste. Marie
New Democratic Party
Legislative Assembly of Ontario, Canada
INVESTIGATE FRANCHISE ASSOCIATION ABUSES: MARTIN
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.
Also: Martin’s questions directed to the CFA during their Mar 2000 expert witness testimony.
Industry Canada may not understand franchising: who actually employs these 96,000 Canadians.
But how can 3G Capital (buyers of U.S. Burger King in 2010) offer any assurances that the 1,100 or so CDN franchisees won’t be forced to lay off their staff once their gross margins and equity are “right-sized?
Is 3G Capital:
Note recent charges against McDonald’s by the U.S. National Labor Relations Board: NLRB Charges McDonald’s as Joint Employer with Franchisees.
The National Labor Relations Board filed 13 cases against McDonald’s Corp. (NYSE:MCD) and its franchisees this month, alleging they violated the rights of employees, who worked at McDonald’s restaurants at various locations across the country.
The government agency’s complaints state that McDonald’s and its restaurant owners made statements and took actions against fast food workers for engaging in activities that aimed to improve their wages and working conditions. They accuse the parties of interfering with nationwide protests organized by unions over the past two years over their terms and conditions of employment.
Protect franchisees and they will protect their staff.
Section 4, Right to Associate, Ontario, Canada’s Arthur Wishart Act (Franchise Disclosure) 2000.
As sure as water flows downhill, this will lead to franchisee-led, not lawyer-thwarted:
The Right to Associate provision (the de facto CDN standard and what all franchisees in the world aspire to for justice) is one last conceptual obstacle preventing franchisees from taking their appropriate seat at the adult’s table.
Proof?: after 14-15 years, the CDN franchise bar has filtered each attempt to plead Right to Associate (trial and appeal), thereby, defeating the ON justices from activating its potential.
Modern franchising purges itself of unwanted legal obligations: debt and franchisee life savings.
It is instructive to see this ostensible “failure” in slow-motion.
Articles so far (updated on Jan 21, 2015):
Analogy: Modern franchising is the operating system software (a technology). The cute logos are simply the different software applications that run on this extremely sophisticated operation system. There is merit in not revealing this code (eg. may hinder “cooling out the marks“)
Australia, United States, Canada, Great Britain, India, UAE…it’s all the same common law (contract law technology/architecture).
Keep an eye on WikiFranchise.org’s archive of articles on Pie Face (click here)
Founders Wayne Homschek and Betty Fong at a Pie Face in Sydney’s Bondi Junction in the early days. Picture: Troy Bendeich Source: News Corp Australia
Intentional Insolvency: While it is revealed in the report that Mr Homschek probably has no personal assets in Australia, the Pie Face founder and his wife have now put forward a deal to seize back control of the group from voluntary administrators with the backing of TCA and a fresh capital raising on Wall Street.
That proposal will be put to creditors at a meeting slated for tomorrow in Sydney. The administrators have recommended creditors vote in favour of the proposal by Mr Homschek.
Multi-tradename franchisors often are (how should I say this) the least sensitive to franchisees’ investment concerns,
A very good article on Blue MauMau by Janet Sparks, Kahala Acquired in Auction by Serruya Family:
TORONTO – The Serruya family today announced that they have acquired a controlling interest in Kahala Corp., owner of Cold Stone Creamery and many other franchised brands. The transaction was completed on Monday.
The Serruya family brings substantial experience in franchising to Kahala. They are planning for growth of Kahala brands in both international and North American markets.
The new franchisors seem to have to prove something to knowledgeable franchisee advocates.
Former Cold Stone franchisee Cecil Rolle, who has been engaged in litigation with the franchisor said, “I’m hoping the acquisition of Kahala Corp by the Serruya Family is a watershed moment for Cold Stone Creamery franchisee profitability and the harmonization of the franchisor to franchisee relationship, which has been as contentious as they come. The Serruya Family will have to prove to me they are serious about the concerns of the franchisees and their families. Rolle has been an advocate for current franchisees, assisting them in profitability and other issues.
Some of the comments about the buyers from a related Globe and Mail article are speak to all the franchisees might be in for:
Have to agree with the general thrust of the other posts here. These scumbags are right up there with Marc Tellier re ability to engineer massive shareholder value destruction whilst at the same time garnering obscene riches for themselves.
i also got creamed owning their stock. Also, rode up the swisher stock that coolbrands turned into. That stock was jacked up to $10 now its at $1 again!! I will run away from anything that they are selling. No more stocks from them. won’t even try yogurtys since they r involved. Are they still doiong business deals with Jack Banqueseus aka Jack Banks who had four public shell stocks?
this post is all in my humble opinion
Franchisees have much, much less protection against opportunism than do owners of publicly traded stock.
What franchisor sends this message to the retail market?
Is it in acting in bad faith by destroying all existing Lick’s franchisees’ equity?
The franchise bar, with perfect foreknowledge, will take what is left of their money in what will be (in the end) a hopelessly futile attempt at legal justice in Ontario. Talk to your premier and your small business loan provider not your a franchise lawyer.
It is not hard to understand what this is all about: franchisees in any language are the least likely 99% protesters in the world.
1. Franchisees protest at company’s doorstep, Business Standard, Aughust 31, 2012:
The tussle between a section of Reebok franchisees and German sports-goods maker Adidas took an ugly turn today, with about 100 people protesting at the gates of the company’s headquarters in Gurgaon.
The franchisees from the National Capital Region (NCR) were protesting against the new terms proposed by the German sports goods major for operating stores in India. The company had given an ultimatum to about 70 franchisees in the NCR region to either accept the new terms, or shut shop by August 31.
Together, these franchisees operate about 125 Reebok stores in the NCR region. The franchisees, who have formed a consortium called Delhi Reebok Franchisee Association, say the new terms and conditions aren’t viable. These terms seek to do away with the minimum guarantee (MG) model the franchisees were operating on so far. Under the MG model, franchisees were assured a minimum amount from the company, irrespective of sales. It was because of this model Reebok was able to set up about 900 stores in 325 cities and towns, becoming the largest sports-wear brand in India.
2. Reebok’s Delhi franchisees cry foul over notice to close shop, SmartInvestor.In, August 26, 2012
“Now they are asking us to close the shop in just 15 days. They are saying that once the goods are transferred, it is our responsibility,” Delhi Reebok Franchisee Association spokesperson told PTI.
The franchisees claimed that they received notices from Reebok India’s parent Adidas Group on August 13 for closing down their stores by August 31 if they do not accept the new terms of the agreement.
“They are purely holding us on ransom and are not ready to settle our claims at all,” they alleged.
In May this year, Reebok India had filed an FIR, alleging that its former Managing Director Subhinder Singh Prem and Chief Operating Officer Vishnu Bhagat were involved in a Rs 870-crore fraud by indulging in “criminal conspiracy” and “fraudulent” practices over a period of time.
Currently, Serious Fraud Investigation Office and the Income Tax Department are probing the alleged financial irregularities in Reebok India Company.
John Lorinc wrote the book on franchising from a franchisee’s investor viewpoint.
I’m glad to see it is still available to buy online and is in many Canadian libraries.
The hidden banking side is revealed in Chapter 4, The 90% Solution: Franchise Economics, some of which I excerpted in a WikiFranchise.org post.
What did the business press have to say about Lorinc’s work?:
Finlayson strikes a cautionary note, specifically about the hinted at misuse of the Canada Small Business Financing program, CSBFP:
Does all this matter to you? Yes, it does. In 1993, in the wake of vigorous complaints by small-business owners that Canadian banks were reluctant to finance them, Ottawa raised the ceiling on loans guaranteed by the Small Business Loans Administration to $250,000 and its guarantee rate from 85 per cent to 90 per cent, sparking a bank lending rush to franchisees and shifting the risk of franchise investments onto taxpayers’ (your) shoulders.
The Risk: Only a fraction of the Liars’ Loans are ever claimed by the banks, thereby grossly understating Industry Canada’s default statistics (Franchised v. Non-Franchised loan performance). The franchisee thinks he signed a government-backed loan but it never gets registered as such. As their bankruptcy, loss of life savings, marital and family breakdown escalate over the life of their 12 to 18 month franchise career, the franchisee NEVER looks to Box 9 of the CSBFP loan application form (Projected Sales ) as the source of their trouble; where the lie is put into the “Liars’ Loan”. The proceeds of these engineered-to-fail loans is split upfront by the franchise banker with the bank, banker, franchisor and sales agent. If questioned, the bank shreds the paperwork and waits for the lawsuit.
And, seriously, how many of these Immigrants as prey losers could or would ever sue a Schedule 1 chartered bank?
The Return: Smashing quarterly earnings goals, record profits, high turnover in the small business division of each of the banks, and making franchise lending the most lucrative form of commercial lending in Canada. Private gain/public loss enabled by a criminogenic environment, moral hazard, regulatory capture…
Lorinc carefully mentions the “windfall profits” in this arrangement of churning:
What’s more, some banks and franchisors have put the SBLA program [predecessor government guaranteed loan program] to questionable use during foreclosure actions against franchisees, says one former owner who has been through the process. When a bank calls a loan against a non-performing franchisee, the 90% guarantee effectively relieves the bank’s receiver from trying to get the best possible value while disposing of the owner’s assets. With most of the loan covered by the Canadian taxpayer, the assets – fixtures, kitchen equipment, inventory, etc. – can be sold quickly at a deep discount, possibly below market value. This allows the franchisor too step in and buy back the property at better-than-firesale prices, thus generating a windfall profit when the store is later re-sold to another franchisee.
An important work that, depressingly, is as relevant in 2012 as it was in 1995.