Owners of 17 Pizza Pizza franchises

…the financial position of the 17 “ranges from the desperate to the barely okay,”

The INFO Franchise Newsletter
April 1, 1993

Owners of 17 Pizza Pizza franchises

OWNERS of 17 Ontario Pizza Pizza franchisees have gone to court seeking $7.5 million in damages and an accounting of how their money has been handled. They have also applied for an injunction to restrain Pizza Pizza from interfering with their businesses or terminating their franchise agreements. According to the court action filed by the franchisees, the financial position of the 17 “ranges from the desperate to the barely okay,” the group’s lawyer, John Sotos says. (Sotos, Karvanis, Toronto, ON, Tel: (416) 977-0007) The court filings allege financial problems worsened when management recently raised rent charges to 10 per cent of net sales and hiked the central phone charges to $1 a call from 91 cents. The franchise owners believe they’re entitled to see where the money is going, Sotos notes. Included in the lawsuits, filed in Ontario Court, general division is an affidavit from an Oakville franchise owner who says he is struggling despite a high sales volume. Garry Solomon, a married father of two, says he has been unable to take home more than $500 a week, and for several months last year the family moved in with relatives to save money. Solomon’s affidavit contains allegations that remain to be proven in court. The company will have an opportunity to respond. Among Solomon’s allegations:

  • He was fined $1,000 when he ran out of pop and got a couple of cases from a nearby store, instead of buying from head office at a delivered price of $8.30 a case.
  • $1,700 was withdrawn from his account for a neon sign he didn’t receive and he is in the dark about the status of the payment.
  • His supplies were cut off when Pizza Pizza said he owed $3,200, but head office later acknowledged it had withdrawn $3,500 more than it should have from his account.

Solomon’s affidavit says management attempted to dissuade store operators from joining the fledgling franchisee association, which had an organizing meeting in January. The association has grown to about 60 members while others “don’t get involved but have contributed funds to us,” spokesperson David Michael says, adding that the members “just have no idea where the money’s going and why we’re paying these increased charges. We’re doing good volume business with a quality product but the bottom line just isn’t there.” In the end, the 17 who joined the court action felt it was their “only option. There have been meetings with management, with our ideas conveyed to them. It’s listened to but not acted on,” Michael says. A statement released by Pizza Pizza on February 5, 1993, announced that the company had “initiated an impartial financial review” of company-managed franchise pools in response to complaints from a minority of franchise owners. (For example, under the franchise agreement, a rental pool was established to provide for the equalization of rents and related costs. Each franchisee paid into the pool their annual rent under the sub-lease. Other pooled amounts include the order processing fee, advertising fee and delivery fee.).

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