Mr. Richard Cunningham spoke very professionally and accurately for the franchisor- and supplier-only association.
Mr. Tony Martin, MPP was a key player in asking the right questions which helped clarify how much contempt each stakeholder had for the democratic process. There were five expert witness spots in the 4 days of travelling public hearings that resulted in the Arthur Wishart Act (Franchise Disclosure), 2000. The subcommittee gave the CFA one of those slots. The complete record of testimony can be found on WikiFranchise.org.
Mr Martin: I’m following up on the question that Richard [Patten, MPP] asked a few minutes ago in terms of who you’ve actually kicked out of the association. I’m led to believe that, in fact, you’ve only revoked the membership of one and that was Pizza Pizza. Is that correct?
Mr Cunningham: I’m not at liberty to say, I believe. That would be privileged information of the association and I don’t think it’s appropriate to make any of that public here.
Mr Martin: You’re not going to give me any numbers even?
Mr Cunningham: No.
Mr Martin: Then just to query as to the membership in your group and who you speak for, I’m led to believe that you have 220 out of about 1,300 franchise systems in the country. Is that correct?
Mr Cunningham: I don’t what the date of that paper is, but our franchise member list is just over 300 right now because some of our member companies, like CARA, for example, would have eight brand names.
Mr Martin: And 80 of your members are lawyers, accountants or consultants?
Mr Cunningham: Correct.
Mr Martin: Also there are some big systems-and we heard from one of them today-that don’t belong to your association. Do you have any auto dealers?
Mr Cunningham: No.
Mr Martin: Do you have any food stores?
Mr Cunningham: Yes.
Mr Martin: How many?
Mr Cunningham: One chain.
Mr Martin: Petroleum stations?
Mr Cunningham: Yes, Petrocan.
Mr Martin: What about hotels and motels?
Mr Cunningham: Yes, a number of them.
Mr Martin: You made a statement earlier about the information I shared with the committee that the perception out there is that there’s lower risk by going into a franchise than the independent small business route. I have a study that suggests that’s not the case that the incidence of failure in franchising is greater than in going the independent route.
Mr Cunningham: I don’t know your study so I can’t comment on it.
Mr Martin: It’s a study called Survival Patterns among Franchisee and Nonfranchise Firms Started in 1986 and 1987. I can give you a copy of the report. It was reviewed by Ms Susan Swift from our legislative research branch, and it’s actually quite interesting. It has a number of findings that I think maybe your association might find worth looking at because it challenges very seriously the contention-and I suggest it’s something that needs to be perhaps looked into further. If we’re offering franchising in the country as a more secure way to get into business, particularly in an environment where there are a lot of people who are being restructured and walking around with severance packages looking for someplace to invest them and they are thinking that franchising is a bit more risk-free than actually setting up an independent business, then we may be sending them down a road that will result in stories such as the ones we’ve heard over the last two or three days here.
Mr Cunningham: Can I respond to that?
The Vice-Chair: Go ahead, sir. We’re just about out of time here now.
Mr Cunningham: Even if these statistics are out there, and as people are being told that franchises are more successful than non-franchises, the disclosure is going to give them the information and the ability to contact people in the system. If they call up XYZ system and talk to 10 of the franchisees and they say, “I’m not allowed to associate,” “I’m not making any money,” “I’ve been in this business five years and I’ve lost money,” or “I’m not in the system any more because I lost my life savings,” I think that in itself is going to tell those people, regardless of what any statistics are, not to buy.
Mr Martin: The problem is, though, that a lot of the people that they should actually talk to have signed confidentiality agreements and they can’t talk.
Mr Cunningham: They wouldn’t be able to do that, though, with this disclosure legislation.
The Vice-Chair: Richard, thank you so much for your time today and for the presentation you left with us.