Ontario needs franchise law

The dream of owning a small business can become a nightmare for franchise owners who discover too l ate they’ve sign away their lives – and their profits. Well-intentioned investors can wind up bankrupt, homeless and heartbroken if they accept misleading offers or agree to draconian contracts with franchisors. It’s not enough to wag a finger and declare “buyer beware.” There are few ways to protect against the unknown in the $17 billion-a-year franchising industry that some call the “Wild West” of the business world.

The Toronto Star
May 4, 1993

Ontario needs franchise law
Editorial

It’s not enough to wag a finger and declare “buyer beware.” There are few ways to protect against the unknown in the $17 billion-a-year franchising industry that some call the “Wild West” of the business world.

A three-month investigation by The Star’s Kevin Donovan, Dale Brazao and Paul Moloney has raised questions about Pizza Pizza, whose franchisees are in court demanding an account of their trust funds.

Ontario has no law requiring franchisors to disclose details of their financial health, their business plans or their past criminal record to prospective buyers. Yet, that’s exactly the type of information investors need when deciding to risk their like savings.

In the past few years:

  • About 1,000 investors lost more than $2.8 million in Food Court International, which promised – but never delivered – a Metro-wide home catering service.
  • Investors lost more tan $1 million in the ill-fated Holey Donuts franchisees.
  • Investors were soaked for more than $850,000 by a company that offered franchise rights to sell “scratch and win” coupon books through stores, but made no such arrangement with the merchants.

As far back as 1971, a provincial report called for a law to safeguard investors, but the proposal was shelved.

It is time Ontario considered following the lead of some American states and Alberta, which require disclosure of pertinent information to franchisees.

Marilyn Churley, minister for consumer and commercial relations, is hesitant to yoke entrepreneurs with new regulations. But there’s nothing too onerous about requiring a company to disclose criminal records or to file a detailed business prospectus, including the costs, rules and benefits of a deal.

Her distaste for getting involved in “business to business” transactions doesn’t hold water, either. People who buy franchises are small investors trying to grapple with organized firms holding all the cards.

Minimum standards would help correct the power imbalance.


Brought to you by WikidFranchise.org

Risks: Grange Report, Fraud, Misrepresentations, Ministry for Consumer and Commercial Relations, State sanction, Fear of poverty, Broken relationships, ruined lives and alienated children, Health consequences, Bankrupt, Lost homes, Emotional collapse, Wild West of the business world, Canada, 19930504 Ontario needs

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License