Franchise industry seeks tougher rules

> The franchise industry’s umbrella group plans to implement a new code of ethics and encourage more corporate disclosure. But a spokesperson acknowledges the moves won’t give any “new teeth” in dealing with questionable conduct…The association has no plans to oust Pizza Pizza as a member, arguing allegations against the company are unproven and there have been no code breaches.

The Toronto Star
October 22, 1993

Franchise industry seeks tougher rules
Plan calls for more disclosure
Tony Van Alphen

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The franchise industry’s umbrella group plans to implement a new code of ethics and encourage more corporate disclosure. But a spokesperson acknowledges the moves won’t give any “new teeth” in dealing with questionable conduct.

The Canadian Franchise Association expects membership approval at its annual convention next week for voluntary disclosure of information related to company activities, financial position and key personnel so prospective franchise holders can make better decisions.

Furthermore, association members – more than 200 firms whose fast-food outlets and other business operations are run as franchises – will likely favor an updated code of ethics or standards of practice that will make it easier to define breaches.

But association president Richard Cunningham said yesterday the group, which has faced criticism in recent years for not doing enough for members’ franchise partners, won’t be able to banish members who fail to comply with the shift to additional disclosure.

“It’s voluntary for now and we won’t be able to reprimand anyone for not doing it in the medium term,” Cunningham said in an interview. “There aren’t any new teeth.

“But we are heading down that road where we’d like to make disclosure mandatory as a condition of membership.”

He suggested the association’s board might recommend mandatory disclosure at next year’s convention. However he conceded it would be difficult for the association to check each franchisor on the accuracy of its disclosure.

Call for franchise code
The association has been working hard in the past year to improve its image after criticism about the lack of protection from unscrupulous firms that attract potential franchise holders with inflated business projections and then trap them into iron-clad contracts.

The Star has reported extensively this year on the plight of Pizza Pizza store owners who have questioned the company’s management and methods. The store owners also expressed a lack of confidence in the chain after finding out a convicted con man and racketeer oversees company trust accounts worth millions of dollars.

The association has no plans to oust Pizza Pizza as a member, arguing allegations against the company are unproven and there have been no code breaches.

Under voluntary disclosure, the association would like a franchisor to provide serious applicants with detailed information on its history, financial health, store closures, business experience, major shareholders, key personnel and any criminal records.

Cunningham said the company would provide the information after potential franchise holders submit a deposit. The franchisor and prospective franchisee would set conditions under which the deposit could be returned if the applicant decided against investing, he added.

He noted that the industry is working with various provincial governments in an effort to become self-regulating.


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Risks: Pooled money, Racketeering, Canadian Franchise Association, CFA, Code of ethics, almost never enforced, Sincerity, Convicted fraud artist, Disclosure laws: 10 per cent solution, Code of ethics, a joke, Hates publicity, Mask of respectability, Mask of respectability, Veneer of egalitarianism, Tobacco-industry-type defense, Fox to guard the henhouse (self-regulation), Sham of self-regulation, Canada, 19931022 Franchise industry

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