Ontario franchisees seek watchdog with bite

“The industry cannot manage itself, that is absolutely clear,” Sotos said. He said about one-third of franchise organizations have serious problems with members…decide to give an industry body enough regulatory teeth to punish violator and, by virtue of the province’s predominance of franchising players, create a new national standard for the industry.

National Post
September 1, 1995

Ontario franchisees seek watchdog with bite
Paul Brent

An unusual demand by Ontario’s franchisers and franchisees to be regulated for the first time could soon result in new industry laws that will be adopted by the other provinces.

The franchise industry has reversed its long-standing opposition to regulation in Ontario, but in typical fashion the feuding sides cannot agree on how or to what extent they should be policed.

This week a government-sponsored task force on the booming industry submitted a report to Ontario Consumer and Commercial Relations Minister Norman Sterling calling for a response “through a legislative approach.”

Franchisers want the government to adopt a draft bill similar to Alberta’s new Franchises Act, which forces franchisers to provide a disclosure document to prospective franchisees 14 days prior to any signing of operating contracts.

But the province’s franchisees, led by the 4,000-member Ontario Franchisee Coalition, wants to go further and faster. It is calling for the simultaneous creation of an industry watchdog with the power to judge and punish violators under the yet-to-be-created legislation.

“Alberta is basically what franchisees call the 10% approach,” said John Sotos, counsel for the OFC and a member of the Ontario task force.

“Alberta’s approach as it currently stands is going to assist only a small number of franchisees and resolve only a small number of problems because it only addresses (the issue of) disclosure.

“The problems in franchising today are not at the front, not before you buy, but once you have purchased,” Sotos said. “Does the franchisor have the right to force the franchisee to spend $100,000 to renovate a store in five years when the franchisor is doing the renovations.

“The industry cannot manage itself, that is absolutely clear,” Sotos said. He said about one-third of franchise organizations have serious problems with members.

He hopes that Ontario will decide to give an industry body enough regulatory teeth to punish violator and, by virtue of the province’s predominance of franchising players, create a new national standard for the industry.

Richard Cunningham, president of the Canadian Franchise Association, which represents about 250 franchise groups nationally, believes the adoption of an Alberta-style disclosure law will eliminate most of franchising’s current problems.

“They want to go the whole route immediately,: Cunningham said. “We think it needs to be a step-by-step process. The issues that typically come up now would be covered by the disclosure.”

Besides agreeing that some form of legislation is needed, the groups say they have achieved a major accomplishment by agreeing to a number of proposals.

The submission before the government asks for the establishment of an industry code of ethics, legislated disclosure requirements for franchisors, the right for franchisees to associate and the creation of a national registry to compile statistics.


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Risks: Ombudsman, Ministry of Consumer and Commerical Services, Ministry of Consumer and Business Services, Ministry of Government and Consumer Services, Ministry of Government Services, Ontario, Franchise Sector Working Team, Tied contracting, Sham of self-regulation, Richard Cunningham, Canadian Franchise Association, CFA, Code of ethics, almost never enforced, Right to associate, Commission with investigation, publication and enforcement powers, Disclosure laws: 10 per cent solution, Related company transactions, Register franchisees and franchisors, 1/3 franchises do well, 1/3 break even & 1/3 lose money, National Franchise Council of Canada, Ombudsman, Ministry of Consumer and Commercial Relations, Franchise Sector Working Team, Tied contracting, Sham of self-regulation, Richard Cunningham, Canadian Franchise Association, CFA, Code of ethics, almost never enforced, Right to associate, Commission with investigation, publication and enforcement powers, Disclosure laws: 10 per cent solution, Related company transactions, Register franchisees and franchisors, 1/3 franchises do well, 1/3 break even & 1/3 lose money, National regulator, Canada, 19950901 Ontario franchisees

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