Look at franchise law, Queen’s Park urged

The Ontario government should appoint a fact finder to see if need exists for more disclosure by franchisors in view of the controversy surrounding the Pizza Pizza chain, opposition critics say. A fact finder would investigate whether there is a widespread lack of disclosure in the sale of franchises that would warrant some form of regulation or legislation, according to Carman McClelland, Liberal critic for consumer and commercial relations.

The Toronto Star
May 12, 1993

Look at franchise law, Queen’s Park urged
Tony Van Alphen

ErnieEves.jpg

ERNIE EVES: Tory says industry needs to increase disclosure requirements.

The Ontario government should appoint a fact finder to see if need exists for more disclosure by franchisors in view of the controversy surrounding the Pizza Pizza chain, opposition critics say.

A fact finder would investigate whether there is a widespread lack of disclosure in the sale of franchises that would warrant some form of regulation or legislation, according to Carman McClelland, Liberal critic for consumer and commercial relations.

“I think the situation requires an independent objective review of the competing interests in the industry,” McClelland said yesterday. “This doesn’t need a full-blown public inquiry, royal commission or whatever that would cost a lot of money.”

Ernie Eves, consumer critic for the Conservatives, agreed, adding that if the practice of poor disclosure is prevalent in other franchisors, the government may have no choice but to intervene.

Pizza Pizza hired Lorn Austin, a convicted con man and rackateer with a string of bankruptcies in his past, in 1989. He is now at the helm of the pizza empire and helps to oversee trust accounts worth millions of dollars.

Store owners, who were unaware of his background until revelations in The Star, suspect mismanagement of those trust accounts and have gone to court seeking $7.5 million in damages and an accounting of how Pizza Pizza has handled their money.

“I don’t think there should be intervention in business-to-business transactions but I have a great deal of sympathy for the Pizza Pizza franchisees,” said Eves, MPP for Parry Sound and Tory House Leader.

Eves and McClelland said in separate interviews they personally think there is a need for more disclosure so prospective franchisees can make proper decisions on investing.

“There has to be proper disclosure to address the inequities in the market place and then investors can make an informed decision, live with it or die with it,” said McClelland, MPP for Brampton North.

Some lawyers and industry insiders claim problems of accurate and detailed disclosure by franchisors and unfair treatment are rampant throughout the industry.

McClelland said there could be an industry body similar to the Ontario Securities Commission, a quasi-judicial body that governs the sale of securities in the province.

Eves said it should be apparent to members of the Canadian Franchise Association that the industry needs to increase disclosure requirements.

The association, which represents 170 franchisors including Pizza Pizza, is currently drafting new disclosure requirements for consideration later this year. It introduced a mediation service recently in an effort to settle disputes between members and franchisees.

The association is also trying to stop changes to franchise legislation in Alberta that would offer arbitration in settling disputes, force franchisors to show just cause in canceling renewal contracts, and increase fines and prison terms for violations.

Alberta is the only province that has franchise legislation which requires detailed disclosure on a company’s background, key personnel, financing and projections.


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