Reverse the onus on good faith

October 8, 2010

The problem with the “good faith, fair dealings” issue is that the little guy (franchisees) have to prove that their franchisor played unfair.

  • How about making the franchisor show they acted acted fairly instead?

I think this is a very clever idea and would prevent much bad behavior.

This was a suggestion brought forward by Gerald Nori of Wishart Law Firm LLP in 2000.

I think it’s interesting that in that circumstance the Grange report does a reverse of onus. It says there has to be fair dealing, and if there isn’t fair dealing, then it’s up to the franchisor to show, and I quote, “that the contract between the parties was fair.” In other words, the onus shifts, not from the franchisee to prove they were treated unfairly but to the franchisor to prove that franchisor dealt with this individual fairly. I think that’s an extremely important concept. It goes on to say that the franchisor’s conduct was “equitable in the circumstance.” So you have this onus on the franchisor, at that point, to prove they dealt with this person fairly.

And in response to a question By John O’Toole that this may increase litigation, Mr. Nori was firm in the opposite direction:

I would see it as just the opposite. I would see it as the big guy now having to come into court with all the resources and proving that the treatment was fair under the circumstances. That’s a tremendous onus for the little guy to prove. The other thing is that the documentation is never there. The documentation is always in head office, and you never know whether you’re getting the whole story. So I think that’s an extremely important concept.When I spotted that in the Grange report, I thought, “Boy, there’s something that really would have some meaning in this legislation to equalize the playing field,” because it is tremendously unequal.

Mr. Nori’s reference to the Grange Report under (see under Legislative Approach, (iii.) Contractual v. equitable approach  section) is from 1970:

3. In these dealings also, placing the burden upon the franchisor to prove,
(a) that the contract is fair; and
(b) that the franchisor’s exercise of his rights under the contract is justified in the circumstances.

“Justified” is the absence of opportunism. The test for opportunism is: Would the franchisor have likely made this decision if it were their own assets at risk?

Advertisements

Gag orders distort & defeat rational investment decision making

September 30, 2010

Franchising is as healthy as its secrets.

mike right-web

Confidentiality agreements are used promiscuously:

  1. pre-sale (when looking),
  2. at any cash payment for “wrongs” during the relationship,
  3. at renewal,
  4. at listing of business for sale,
  5. when you exit, and
  6. at any lawsuit end.

In my 15 minutes of fame, I was asked a question:

[John O’Toole] Can you suggest one thing within the framework we’ve defined that would improve – not totally correct; we’ve passed that, we’re not astronauts – but one thing we could do that would make a real impact on these 40,000 victims, self-imposed victims in some cases? What could we do?

Mr Stewart: Outlaw gag orders. Outlaw gag orders.

Confidentiality agreements encourage opportunistic franchisor behavior because they conceal bad behavior to unsuspecting current and future financial market investors. They are a very large source of imperfect investment information.

Silence puts gold in only the pockets of those proposing these “agreements” that are tethered to the franchisee’s life savings.

More corrosively, they operate internally the same way a false prisoner confession works.

Psychologically they create an internal silencing mechanism, part of which is explained by the concepts of cognitive dissonance, learned helplessness, and obedience (Milgram, Stanford prison, Abu Ghraib). The experience of franchising can be engineered to provide a subtle and not so subtle method of mind control as was seen in the ’70s case of est.

The victim becomes convinced that they were the cause of their own suffering.


%d bloggers like this: