Pizza Pizza appeals award in fight with franchisees

Pizza Pizza does not want the award or transcripts of the hearings made public. The franchisees do…While Pizza Pizza has seemingly limitless financial resources to continue the legal battle, the franchisees do not. They had been counting on the arbitrator’s award to cover their legal bills, but the award is on hold pending the appeals./

The Toronto Star
December 6, 1994

Pizza Pizza appeals award in fight with franchisees
Kevin Donovan

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Pizza Pizza is appealing the final award in the case brought against it by 49 angry store owners.

That award was made by Richard Holland, a retired Judge who sat as arbitrator in the bitter dispute.

Two rulings prevent The Star from saying which side Holland awarded money to, and what other decisions he made.

Pizza Pizza does not want the award or transcripts of the hearings made public. The franchisees do.

In 1993, The Star detailed allegations by franchisees that Pizza Pizza took too much money from their bank accounts, mismanaged franchisee money, and engaged in harassment tactics to intimidate store owners, many of them recent immigrants.

Pizza Pizza has denied all allegations.

One of the major issues was the concept of the “pools,” Pizza Pizza accounts that hold millions of dollars of franchisee monies for such things as rent and advertising. The franchisees say these are trust monies. Pizza Pizza says they are not.

The allegations began as part of a public court case presided over by Mr. Justice James Farley.

By June, 1993, it had been transferred to arbitration, a process both sides agreed on because it would provide a speedier result.

At Pizza Pizza’s urging, the arbitration was deemed confidential by both Holland and Farley. Franchisees have told The Star that they wish they had not gone along with that decision.

Months of hearings were held in a downtown boardroom, presided over by Holland, with a court reporter recording testimony. Accountants from both sides made their position known. So did senior Pizza Pizza executives. Franchisees testified at length about their experiences.

All behind closed doors.

Throughout this time, the Ontario government has been grappling with the broader subject of franchise legislation. But the rulings prevent politicians and bureaucrats from studying the Pizza Pizza case.

Consumer Minister Marilyn Churley and backbencher New Democrat Jim Wiseman are independently working on proposed franchise legislation, which would deal with many of the issues raised by the Pizza Pizza dispute, including the management of trust funds and mandated disclosure of a franchisor’s financial picture.

The secret nature of the Pizza Pizza dispute should change if the appeal proceeds.

After Holland made his ruling, Pizza Pizza filed a notice of appeal in October. Fifteen days later, the franchisees filed a notice of cross-appeal.

Today, both sides will appear before Farley in chambers to discuss the timing of the appeal, say lawyers for both sides.

“It is to straighten out and discuss the procedure for where we go from here,” said Pizza Pizza lawyer Gavin MacKenzie. “I think we will know after that what times are set for the filing of public documents. I expect there will be a date set to argue any questions of confidentiality that might arise.”

Although the appeal process in Ontario is traditionally public, MacKenzie said “the court can always make an order that certain documents remain confidential if the court is persuaded that it is in the public interest.”

One large stumbling block could end this case right here.

While Pizza Pizza has seemingly limitless financial resources to continue the legal battle, the franchisees do not. They had been counting on the arbitrator’s award to cover their legal bills, but the award is on hold pending the appeals.

In a letter dated Nov. 29, John Sotos, the main lawyer for the franchisees, writes that he and other lawyers working on the case will require a fresh retainer of $250,000 to proceed with the appeal.

Many of the franchisees are teetering near bankruptcy and are scraping to come up with the retainer.


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Risks: Justice only for the rich, Franchisee decision, bankruptcy, Futility of taking legal action, Ministry of Consumer and Commerical Services, Ministry of Consumer and Business Services, Ministry of Government and Consumer Services, Ministry of Government Services, Ontario, Veil of secrecy, Bank account access by franchisor, Immigrants as prey, Intimidation, Pooled money, Advertising fund put into general franchisor's coffers, Arbitration, secret, Veil of secrecy, War of attrition, Run the billable hour clock, Don’t owe your lawyer money, Gag order (confidentiality agreement), Gag order, court-mandated, Canada, 19941206 Pizza Pizza

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