Franchise bankers are Always there for you (whoever you are)

December 23, 2008

friendIn August I wrote a post called Why Australia will get a McLaw.

WA Today ran a story this week by Chalpat Sonti called Franchising inquiry slammed as golden opportunity missed.

Perth-based Narelle Walter, a former franchisee who claims that an induced breach of contract left her out of pocket by $5 million, said the committee did not go far enough:

“Franchise renewals have not been addressed properly and I am distressed that the apportion of good will has not been determined,” she said.

“Franchisors can misuse this loophole in the franchising code and the (Trade Practices Act) to steal the assets of small business investors (through a process known as “churning”, when the franchise is on-sold by the franchisor to someone else).”

Interesting that Ms. Walter draws specific reference to franchise bankers co-operating closely with franchisors:

There was still a big incentive for banks to support the franchisor in the churning process, because they would rewrite loans with an [newer] “unsuspecting” franchisee, she said.

These allegations echo others, especially MP Jo Gash in my September post called Collusion allegation: AUS bank and franchisor.

I wrote about the very cozy franchise banker :: franchisor relationship in a paper to Industry Canada in 2005 called  Franchising Opportunism. It is also a good summary of how the Canadian and Australian franchise industry really works.

  • Feel free to download a pdf copy of Franchising Opportunism right here.

With friends like these bankers, investors do not need any enemies.

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Collusion allegation: AUS bank and franchisor

September 18, 2008

In a Smart Company article by James Thomson called MP renews calls for investigations into mistreatment of Bakers Delight franchisee, he quotes:

NSW parliamentarian Joanna Gash has renewed calls for the Australian Federal Police to launch an investigation into accusations Bakers Delight and ANZ bank colluded to put a franchisee out of business.

Quoting emails between the franchisor and the bank, Gash alleges:

On Monday, Gash revisited the case in Parliament, producing emails from Bakers Delight chief financial officer Richard Taylor and ANZ executives that she says shows “plans had been conspired to terminate Ms de Leeuw’s franchise well ahead of time”.

The bank and franchisor deny all the allegations.

This is the first public AUS public allegation of the key franchisor:franchise banker relationship that I identified and wrote about in a 2005 paper for Industry Canada called Franchising Opportunism [free download].

The Royal Canadian Mounted Police did a 10 month investigation of a related predatory franchise lending matter. [free download: Mounties investigate ‘predatory lending’, Ottawa Citizen, March 25, 2006]

And Mr. Oudovikine is accusing the bank of transferring the loans to Country Style without his authorization before he had a chance to obtain a business plan and other financial details from Country Style.

Mr. Oudovikine says his case shows how big banks, franchisors and franchise brokers team up to take advantage of franchisees, many of whom are recent immigrants like him.

“It’s predatory lending. (CIBC) didn’t do any of the due diligence they should have done,” says Mr. Oudovikine, who sent the Citizen e-mails confirming the RCMP investigation. An RCMP official said the police force doesn’t confirm or deny investigation.

And the Canadian bank’s reaction?

Mr. Oudovikine says he has repeatedly contacted senior CIBC officials and executives about the loan dispute, to little effect. He alleges that CIBC breached the Canada Small Business Financing Act regulations that require lenders to conduct due diligence on borrowers, including their ability to repay loans.


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.

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


Homicidal McTurkey spotted in AUS

September 16, 2008

“Let’s not let turkeys kill the goose that laid the golden eggs.”

An interesting quote from John O’Brien, Chairman of the Franchise Council of Australia, NFC in a Smart Company article called: Franchise Council hits back at critics.

It seems Australia’s democratic process (ie. citizens speaking to politicians, members’ raising constituents’ concerns within parliament, Hansard records, governments asking House/Senate committees to look into areas of potential legislation, Joint Committees asking for citizens to contribute, yaddayaddayadda) has AUS franchise industry’s self-proclaimed “peak body”, a little miffed:

The Franchise Council of Australia has urged members to “push back” against claims of franchisor abuse aired in Federal Parliament last week.

A number of MPs, including NSW member Joanna Gash, told Parliament last week of allegations of churning, bullying and intimidation by franchisors. On top of this, a Federal Parliamentary inquiry into franchising was flooded by submissions from disgruntled franchisees.

It appears that Mr. O’Brien is sensitive to any lack of confidence in Australia’s franchise industry:

“If you are as annoyed as I am at these continuing smears against franchising, I urge you to email or write to the committee handling the inquiry right away,” he writes.

“Let’s not let turkeys kill the goose that laid the golden eggs.”

It was unclear to me who Mr. O’Brien was calling a turkey (bird brain?). Each or all of the following:

  1. Mrs. Joanna Gash MP, (duly elected in 1996 then re-elected in 1998, 2001, 2004 and 2007 by the fine people of the Electoral Division, Gilmore NSW),
  2. the other 7 MPs who have joined her in demanding immediate parliamentary action to curb franchisor opportunism (see Franchising at a crossroads),
  3. the Parliamentary Joint Committee on Corporations and Financial Services or
  4. the clearly diabolically obsessed mastermind, the thuggish: Deanne de Leeuw.

In any case, Big Franchising is always more than willing to “hit back” to get their way.

  • As any good fascist knows, democracy is the last refuge for losers.

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