Complaint letter to Canadian Franchise Association, Nutri-Lawn

Please accept this letter as a complaint against Nutrilawn International/The Franchise Company.

Mr. Les Stewart
September 1, 1997

Formal Complaint against Nutrilawn International/The Franchise Company

CONFIDENTIAL

Facsimiled to: (905) 625-9076

Mr, Richard Cunningham
President
Canadian Franchise Association
5045 Orbitor Drive, Building 12
Unit 201
Mississauga, Ontario
M4W 4Y4

REGARDING: Formal Complaint against Nutrilawn International/The Franchise Company

Dear Mr. Cunningham:

Please accept this letter as a complaint against Nutrilawn International/The Franchise Company. I signed my franchise agreement with Nutrilawn International Inc (NLI) on December 10, 1992. NLI is a member of the Franchise Company’s (FTC) series of franchise systems.

I have been in possession of your association’s Code of Ethics since March 12, 1996 although this complaint will be based on the revised Code, sent to me on January 6, 1997 (see attached). It is my understanding that the format of this complaint is to (1) state “specific facts giving rise to the complaint and the specific section(s) of the Code alleged to have been breached” and (2) to authorize the CFA in sending a copy of the complaint to the member in question.

I authorise the release of this information to NLI or TFC only if my complaint is accepted in its entirety, as being in a format that is acceptable for review by the CFFA. I had wanted to talk to you informally about this matter but our schedules have not made that possible.

Fact
NLI-TFC accepted me as a franchisee even though they knew I did not have adequate financial resources to grow the business to an adequate level to return an acceptable return on investment (see Code of Ethics, Subsection 3).

NLI/TFC knew I my new worth was $51,500 upon signing the agreement. I owed over $115,000 after 3 years of operation. This franchise is extremely undercaptialised for a market the size of Barrie, resulting in me personally subsidising the business for 4 ½ years.

Fact
NLI/FTC grossly misrepresented the revenue potential of the Barrie market. I presented pro forma income statements to NLI prior to signing of the agreement (see Code of Ethics, Subsection 5: misrepresentation is not considered “fair dealings” in business).

Appendix A is a copy of the document that I created in 1992. He asked if these wee attainable by someone with my background in a market the size of Barrie, Mr. Derek Riley, then Vice President of NLI, said yes. My 1997 net sales will be about $220,000 versus the $1.3 million projection that Mr. Riley signed off on. This spreadsheet assumed that my franchise would have a market share of about 30% of all single family homes in the county of Simcoe. Both of these extremely inaccurate representations directly lead me to sign the franchise agreement. The franchisor bears some degree of responsibility in setting expectations.

Fact
NLI/FTC threatened to call a demand loan if I did not sell a part of my franchise territory (see Code of Ethics, Subsection 5: coercion and threats are incompatible with fair dealings).

NLI had a potential buyer for the Owen Sound territory. They wanted to add Collingwood to that territory. In a meeting on February 14, 1996, Mr. Derek Riley offered me a reduction in my debt of $1,875 if I gave up the right to Collingwood. I suggested a valuation of closer to $10,000. Since there was no counter-offer, I refused to sell the Collingwood area. Mr. Riley reminded me that there was an outstanding demand loan on unpaid franchise fees of $15,000 and that could be called if I were not more co-operative.

Fact
NLI/FTC has tried many times to stop me from talking with other franchisees on a number of occasions (see Code of Ethics, Subsection 9: Right to Associate and Subsection 5: Coercion, including threats of pushing my business into bankruptcy, have no place in fair business dealings).

Mr. Ken Pavely, they Technical Director of NLI, called me on December 19, 1996 regarding a meeting I had suggested with fellow franchisees. His purpose was to threaten and intimidate the other franchisees and myself. On a conference call the next day with Mr. Riley, Mr. Pavely stated that he was only invited to attend the January 3, 1997 meeting after e had “twisted my arm”.

On July 14, 1997 Mr. Derek Riley, President of NLI, said my wife and I could not attend a Regional Meeting to be held in Port Severn on July 17th and 18th, even though NLI had accepted our deposit for the accommodation. This deposit has not been refunded.

Mr. Derek Riley, President of NLI, called me on August 15, 1997 and told me that I had bett3er stop talking to other franchisees or he would “race our relationship to a very speedy conclusion”. Mr. Riley accused my wife and me of breaching a non-existent confidentiality agreement regarding a special “deal” for 1997.

Fact
NLI/FTC refuses to neither accept any responsibility for the financial losses that have been incurred because of their advise nor to arrive at a reasonable settlement of the outstanding issues as defined the document, Appendix B “Franchise Review” (see Code of Ethics, Subsection 6: no reasonable resolution attempted by franchisor).

Mr. Derek Riley and NLI/FTC have repeatedly accepted no responsibility for the $74,549 net loss in our first year. He accepts no responsibility for the accumulated loses of over $127,000 for the first three years. Mr. Steve Rogers, President of The Franchise Company said in a telephone conversation on August 8th that I “really didn’t lose $127,283 over the first three years, did I”? I assured Mr. Rogers that I did.

The revenue potential of this business was grossly overstated before I signed the franchise agreement. I have simply run out of money and NLI/FTC are unwilling to accept any responsibility for this situation. I assure you I am not the last Nutri-Lawn franchisee you will be hearing from. Most others have much more serious debt loads than I do.

I look forward to your early response. My franchise agreement term expires on December 10, 1997 and I am unable to commit to my existing customers for next year. I am more than willing to discuss the matter with someone within the C.F.A. who actually knows something about the landscaping or lawn care businesses. I believe I have operated in a very responsible and professional manner within the Ontario franchise business sector and am more than willing to have my record withstand independent review.

Thank you for your time.

Sincerely,

Les Stewart
Enclosures

cc: Mr. John Sotos
Mr. Tony Martin
Mr. David Tsubouchi
Mr. Joe Tascona


Risks: 19970901 Complaint letter, Canada,

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