Pizza Pizza franchisees win appeal of award

Pizza Pizza may have acted in a “cynical and heartless” manner when it scooped thousands of dollars from the pockets of individual storeowners, an appeal judge has said in upholding a $1.6 million ruling in favour of 50 franchisees… He said the result of this action was to overcharge the franchisees at a time when they were already shouldering the “difficult, stressful and financially risky” burden of running a franchise. “And if this result was in the contemplation of Pizza Pizza then I think it was a very cynical and heartless contemplation which should not be given legal effect,” MacPherson ruled.

The Toronto Star
April 8, 1995

Pizza Pizza franchisees win appeal of award
Kevin Donovan

PizzaPizzaMichaelOvers1.jpg

MICHAEL OVERS: Pizza chain boss lost bid to overturn court award.

Pizza Pizza may have acted in a “cynical and heartless” manner when it scooped thousands of dollars from the pockets of individual storeowners, an appeal judge has said in upholding a $1.6 million ruling in favour of 50 franchisees.

Mr. Justice James MacPherson found Pizza Pizza was wrong over the years to “unilaterally” jack up the rent and other fees it takes from franchisees’ bank accounts each week.

“Many of these people (franchisees) have come to Canada as immigrants or refugees, worked hard, and saved money scrupulously, and then invested their life savings in the purchase of a Pizza Pizza outlet,” MacPherson said in his ruling.

“They then work long hours, often in arduous conditions, in an attempt to earn a living from their stores.”

But despite signing contracts capping their rent at 5 per cent of gross weekly sales, owners had their rents doubled over the years by Pizza Pizza to the point where there was a “massive” overpayment of $1.4 million, MacPherson said.

He said the result of this action was to overcharge the franchisees at a time when they were already shouldering the “difficult, stressful and financially risky” burden of running a franchise.

“And if this result was in the contemplation of Pizza Pizza then I think it was a very cynical and heartless contemplation which should not be given legal effect,” MacPherson ruled.

The judgement is the latest action in a long-running dispute between the franchisees and Pizza Pizza, a company becoming notorious for its poor franchisor-franchisee relations.

Both the Canadian Franchise Association and the International Franchise Association have recently decided Pizza Pizza does not belong in their ranks.

Last year, the franchisees suing Pizza Pizza won a judgement awarding them $821,495, plus legal costs and interest that could raise the figure as high as $2.7 million. But that number was reduced to $1.6 million due to a series of “outstanding balances” and other charges.

Pizza Pizza appealed the award, made by retired Judge Richard Holland, appointed by the courts to arbitrate.

Mr. Justice MacPherson heard arguments from both sides earlier this year and then dismissed Pizza Pizza’s appeal.

In his ruling, he stressed several times how tough a working life the franchisees have.

Along with the rent issue, he found that Pizza Pizza was wrong in its belief that it could raise the weekly advertising charge above the contractual limit of 6 per cent.

On the issue of interest charges, MacPherson found against Pizza Pizza. Over the years, the various “pools” ran deficits. Pizza Pizza would fund the deficits, then recoup the money from the franchisees and charge them interest on the money Pizza Pizza had advanced.

MacPherson found that Pizza Pizza’s franchise agreement – a giant contract with 20 versions that he noted Pizza Pizza owner Michael Overs calls “my little document” – had no provision for such charges and so disallowed Pizza Pizza’s claim.

Six of the 50 franchisees had launched a cross-appeal against the arbitrator’s ruling that Pizza Pizza had the right to change, in new franchise agreements, the pooled rent system to a direct system. MacPherson ruled that Pizza Pizza has that right.

Franchisee lawyer Tim Mitchell said, “The result is a vindication of the franchisees’ position and a true testament to the determination they have shown over the past two years.”

Pizza Pizza in-house lawyer Dan Vukovich read a prepared statement to The Star.

“Although we don’t agree with the ruling of the court, we are pleased by the arbitrator’s dismissal of the majority of the claims and the fact that the arbitrator put to rest all of the allegations of wrongdoing.


Risks: Without conscience, Bankruptcies, several, Pooled money, Canadian Franchise Association, Fraud, Immigrants as prey, Canadian Franchise Association, CFA, International Franchise Association, IFA, Opportunism (self-interest with deceit), Canada, 19950408 Pizza Pizza

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