MPP takes on bad franchisors

“People are losing homes and life savings…the people being bilked the most are new immigrants,” Wiseman said in an interview. “They think they are going to be working for a company that is going to treat them in a fair and open way and then they find out they have basically sold themselves into indenturement,” he said.

The Toronto Star
October 30, 1994

MPP takes on bad franchisors
Kevin Donovan

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Tough new legislation to control franchises in Ontario is being proposed by a maverick NDP politician who wants to clean up the multi-billion dollar industry.

Durham West MPP Jim Wiseman says his law would force bad franchisors to toe the line or face hefty fines or jail time if they don’t.

“People who need to be legislated are the people who don’t obey the rules and the laws of common decency and morality,” said Wiseman, who spent six months researching the bill.

“People are losing homes and life savings…the people being bilked the most are new immigrants,” Wiseman said in an interview.

“They think they are going to be working for a company that is going to treat them in a fair and open way and then they find out they have basically sold themselves into indenturement,” he said.

Wiseman plans to introduce his private member’s bill early in the fall session, possibly as early as tomorrow.

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Franchising is big business across Canada, with estimated yearly revenues of $90 billion. Everything is franchised these days: pizza, doughnuts, and all kinds of fast food; car dealerships; video stores; cleaner; oil change shops, etc.

People buy into a franchise in various ways, often paying $200,000 or more to franchising company to operate a concept.

But it is an industry in Ontario with no controls. A common complaint of franchisees is that the franchisor misrepresented such things as expected profits and support from the company.

It is often referred to as the “Wild West” of the business world – but only in Alberta (and many U.S. states) is there legislation.

Here are some of the main points of his bill.

  • Companies selling franchises would have to register with the Ontario Securities Commission and file public disclosure documents revealing financial information, copies of proposed contracts and other documents relating to the history of the company.
  • The first step in a conflict would be for either franchisee or franchisor to take the matter to a mediator appointed by the commission.
  • The commission would be empowered to investigate wayward franchisors for violations of the law, and have widespread search and seizure powers.
  • Franchisors convicted of breaches of the law could face penalties ranging from suspension of the right to sell franchises to corporate fines of up to $250,000. Individual directors of companies could face fines of up to $100,000 and two-year jail terms.

The Canadian Franchise Association, an industry group, has stated that there is no need for legislation. Instead, it is in favor of a code of ethics and self-regulation. Recently, the association ousted Pizza Pizza from its ranks after it scored poorly on a random survey that asked franchisees what they thought of their company.

Don Schafer, incoming chairperson of the franchise association, said his group and others want the Alberta law, which is outdated, revamped. But there are rumblings in Alberta, where Schafer works, that the government may get out of the franchise-regulation business altogether.

In the absence of legislation, Schafer believes his industry can practice self-regulation.

“We are striving towards excellence as franchisors. We don’t want people (who) create problems….involved in the industry. We want to police those people. We want to do what we can to get those kind of people out of the industry because it doesn’t do anybody any good.”

For almost two years, a tight-knit band of 48 Pizza Pizza franchisees have been fighting their company, first in court, and now in a secret arbitration process that is rapidly coming to a head.

A Star series in the spring of 1993 detailed the dispute between franchisees and the giant pizza company, started by businessman Michael Overs in 1968 and now run on a day-to-day basis by Lorn Austin, a Toronto man who is a convicted racketeer in the United States with a string of bankruptcies to his name.

Complaints filed in court by franchisees include allegations that Pizza Pizza:

  • Charges unreasonable amounts for rent, store renovations and supplies.
  • Has not properly manager “pool” that hold millions of dollars of franchisee monies for advertising, rent, delivery and telephone order charges.
  • Has franchisees who have been the subject of harassment by company officials. Pizza Pizza denies the allegations.

After the Star series, the NDP government began studying the problem. It is still studying it.

Documents obtained under the Freedom of Information and Protection of Privacy Act show that bureaucrats in the consumer and commercial relations ministry are having regular meetings with both sides of the issue as they look at such things as a voluntary code of ethics.

Wiseman says his government is simply not doing enough. Hence his proposed legislation.

He became interested in the issue at the suggestion of his riding president, a small businessman.

Wiseman has met with franchisees from various companies to hear their concerns. Because franchisees typically fear retribution from their companies if they speak out, Wiseman met with them secretly.

Some franchisors have contracts that prevent franchisees from voicing their concern. Wiseman said the groups he met with were “petrified” they would lose their businesses.

“This idea that you can’t talk to …your MPP or you can’t talk to people about your predicament and ask if there is any way to get some help, that is obnoxious to me,” said Wiseman.

His law would change that, giving franchisees the right to form an organization to voice their concerns.

Franchisees from several companies are expected in the public gallery of the Legislature when Wiseman presents his bill. The Star interviewed some of them last week. While they were positive about the concept of the bill, they fear that Wiseman’s move will die if the NDP loses the next election.


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Risks: Lorn Austin, Lorne Austin, Lawrence Austin, Political champions, Immigrants as prey, Indentured servants, Canadian Franchise Association, CFA, Lost homes, Immigrants as prey, False earnings claims, Commission with investigation, publication and enforcement powers, Code of ethics, a joke, Sham of self-regulation, Tobacco-industry-type defense, Arbitration, secret, Bankruptcies, several, Right to associate and right to harass, Pooled money, Can’t talk to member of parliament, Gag order (confidentiality agreement), Private Members’ Bill, Canada, 19941030 MPP takes

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