Buyouts end Loeb franchise war operators will leave stores

The battle damaged Loeb’s public image and hurt sales in some stores…The stock has taken a beating on the Toronto Stock Exchange, sliding from a high of $8.75 in the last year to a low of $5.00 last week as millions of shares were dumped. Shares closed up five cents at $5.90 on Wednesday.

The Ottawa Citizen
November 28, 1996

Buyouts end Loeb franchise war operators will leave stores
Bert Hill & Julia Elliott

Loeb Inc. and its franchise operators have settled a bitter five-month dispute. In a carefully worded statement designed to assure fed-up customers, anxious staff and nervous shareholders, Loeb said the war is over.

But the tough terms of the deal – the 17 franchise operators will get a buyout and then get out of the stores Friday – reveals the true depth of distrust and discord.

Loeb said it will “focus attention to delivering value to customers” with new store management. Operators called the deal “fair and equitable.”

Loeb and the franchise operators were still fighting in courts in Ottawa and Toronto for tactical advantage late Tuesday as separate teams of lawyers negotiated the final terms of the messy and expensive divorce.

It was the fear about the unpredictable outcome – Loeb’s effort to get eviction orders and the operators efforts to get Loeb financial records – that finally forced a settlement.

There were tears in many local stores as operators told staff they would be leaving. Operators assured employees that their jobs and pay would be maintained by the corporate or new franchise operators.

“In the end, we did what’s best for our employees and our customers,” franchisee Normand Tremblay said from his Ottawa store. “It was best we sell back our interests to Loeb.”

Tremblay, 46, said if he’d known how things would turn out he would have approached the problem differently.

“But I’m not bitter, not really. It’s been an experience and I’m coming out of it richer from that standpoint.

“There are mixed emotions. It’s always difficult to leave people you’ve become friends with.”

But there were probably no mixed emotions among shareholders of Montreal-based Provigo, the parent company at Loeb, at news of a deal.

The stock has taken a beating on the Toronto Stock Exchange, sliding from a high of $8.75 in the last year to a low of $5.00 last week as millions of shares were dumped. Shares closed up five cents at $5.90 on Wednesday.

The long-festering dispute broke into the open in June when 22 franchise operators in Ottawa, Eastern and Northern Ontario sued Loeb, charging that corporate marketing practices were enriching Loeb and impoverishing their stores.

Loeb blamed the dispute on tough market conditions and had announced it would evict the operators from their stores in early November.

That set the stage for demonstrations, lobbying at the Ontario legislature, battles before four judges in two cities and franchise operators sleeping in padlocked stores to keep Loeb takeover teams at bay.

The battle damaged Loeb’s public image and hurt sales in some stores.

For the franchise operators and their families, there were months of sleepless nights over fears they would lose stores in which they had invested years of work. At least three franchise operators made separate pacts with Loeb rather than face the continuing risk. Another two will keep their stores in the final settlement.

Some rival supermarket operators predicted the Loeb operators would gain about $1 million each in addition to having more than $11 million in debts to Loeb forgiven.

In fact, the average settlement is believed to be less than half that – enough to start new businesses but not enough for some veteran operators to retire, particularly owners of smaller stores in Northern Ontario who got much smaller settlements.

In Eastern Ontario, the settlement covers the Elmvale Acres, Hazeldean, Lincoln Heights, Meadowlands, St. Laurent, Rockland, Manotick, Prescott and Kingston stores. The Arnprior store made a separate deal and the Petawawa operator will keep his franchise operation.

One likely outcome of the dispute will be the introduction of franchise legislation in Ontario next spring. There is no federal legislation and Alberta is the only province with franchise rules. However, some experts have said that no legislation could have prevented the ugly battle between Loeb and its operators.

With files from CP


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Risks: Franchisee revolt, Fear, distrust, hate and contempt, Lawsuits, group, Hates publicity, Franchisor takes franchisee stores, Futility of taking legal action, Stock price plummets, Call for franchise law, Canada, 19961128 Buyouts end

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