Franchise group eyes industry regulation

Like any business investment, buying into a franchise is a gamble. But the lack of provincial legislation to regulate the industry makes that risk particularly acute in Ontario, home of about two-thirds of Canada’s 1,000 franchisors.

The Toronto Star
September 27, 1997

Franchise group eyes industry regulation
Steven Theobald

Like any business investment, buying into a franchise is a gamble.

But the lack of provincial legislation to regulate the industry makes that risk particularly acute in Ontario, home of about two-thirds of Canada’s 1,000 franchisors.

Richard Cunningham, president of the Mississauga-based Canadian Franchise Association, said his biggest concern is getting laws to force companies to fully disclose information, including the past history of its owners.

“People need enough information to make a viable business decision,” he said.

The 300 franchisor members of his organization are screened and must provide full disclosure, he said.

Both franchisors and franchisees should also be required to register their businesses as franchises in order facilitate the collection of industry statistics, data that so far doesn’t exist, Cunningham said.

“Right now everyone is guessing what the business success rate is.”

Laws will be introduced by the end of the year, promised David Tsubouchi, Ontario consumer and commercial relations minister.

“Our legislation will be focusing on disclosure more than anything else,” he said. “Right now there is no legislation whatsoever in this province.”

Tsubouchi said his ministry set up discussion committees made up of both franchisors and franchisees.

“They are the ones who actually put together the report we are basing the legislation on.”

Tsubouchi, a lawyer before entering politics, did a lot of work for franchisees and knows first-hand the system is flawed, but he downplayed the problem.

“It’s not a huge area of complaint for the province right now.”

There are still precautions people can take, Cunningham said.

“If the franchisor is not checking you out as closely as you’re checking them out, I would be worried.”

When properly done, the process could take many months, he added.

Also, investors should talk with people, like banks and lawyers, who know the industry well, he said.

People should also be realistic about the amount of work required and the payoff, Cunningham said. “A lot of people think once they get the key and open up the door that money starts flowing through the door.”

Aside from worrying about avoiding scams and making money, people should think long and hard about the type of business they are getting into, Cunningham said.

“A franchisor can teach you how to make a doughnut but they can’t make you interested in that business.”


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Risks: Outright scams, Canadian Franchise Association, CFA, Ministry of Consumer and Commerical Services, Ministry of Consumer and Business Services, Ministry of Government and Consumer Services, Ministry of Government Services, Ontario, Survivability (franchise and franchisor), Necessary illusions, Franchise show, Success rate, we don’t know, Disclosure laws: False sense of security, Register franchisees and franchisors, Need more statistics, Canada, 19970927 Franchise group

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