Ontario Franchise Disclosure Legislation: A Consultation Paper

Franchisees generally carry different risks than other business purchasers/investors. In franchise relationships, the franchisee typically invests the bulk of the capital, yet the franchisor has the right to determine how that capital is used.

Ontario Franchise Disclosure Legislation

A Consultation Paper
Ontario Ministry of Consumer and Commercial Relations

June 1998

Ontario Ministry of Consumer and Commercial Relations – Vision
To promote a fair, safe and informed marketplace that supports a competitive economy in Ontario.

Introduction
This paper outlines a proposal to create a statutory obligation on those offering the sale of franchises (franchisors) to disclose key information to prospective purchasers (franchisees). The government’s objective is to ensure that small business investors in Ontario are better able to make an informed investment decision prior to signing any franchise agreement or making any payment. This consultation paper describes the franchise marketplace and associated issues; it then sets out proposals for the following:

  • specific disclosure requirements, as well as the consequences for failure to disclose;
  • a statutory right of franchisees to associate;
  • definitions of franchise arrangements to be covered in the disclosure requirements and those that may not be covered; and,
  • an approach to the systematic collection of information on franchise activities in order to better understand the franchise marketplace.

The proposals reflect the government’s desire to find the right balance between two distinct needs. On the one hand, there is clearly a need for consumer and marketplace fairness – potential business investors need greater transparency and information. On the other hand, there is an equally compelling need to avoid unnecessary or cumbersome regulations or added costs for small businesses.

To find this balance, the government drew on the views expressed by business groups and individuals, including a small working group representing some franchisors and franchisees – the Franchise Sector Working Team. This group met with Ministry representatives to discuss franchise issues. Although the working team did not reach consensus on every topic related to franchising, it did make a number of valuable recommendations, many of which are reflected in this paper and are now provided to the business community and public for comment and feedback. The proposals in this paper also draw on the experience of other jurisdictions such as Alberta and the United States, where similar franchise disclosure obligations have been in place for many years.

At key points in the consultation paper, frequently asked questions – “FAQs” – are offered to assist readers to organized their thoughts on the proposal. Comments on the proposed disclosure requirements are sought from individuals and business associations. These may be provided by fax, E-mail, regular mail or telephone, as indicated at the end of this paper.

2. The Franchise Marketplace
Franchising is fundamentally a form of business investment and ownership governing the distribution and sale of goods or services. Franchise operations can now be found in virtually every type of business – from food services to restaurant and office supplies as well as hotels and airlines. There are essentially three broad forms of franchise arrangements.

  • Business-format franchises where the manufacturer/supplier (franchisor) sells an entire business package or concept to the franchisee. In addition to the trademark, the franchisee may be given the design of the building and furnishings, location, uniforms, marketing techniques, etc. Examples include fast food outlets and clothing stores.
  • Product distribution franchises where the franchisee obtains an exclusive license from the franchisor to market products in a specific location or area. Unlike business-format franchises, product distribution arrangements allow the franchisee some scope to personalize their business (e.g. “John Smith – Chysler Scarborough”), with the franchisor generally exerting less control over the format of the franchise than described above. Examples include automotive dealers and soft drink bottlers.
  • Business opportunities where the franchisee is provided the rights to sell goods or services supplied by the franchisor as well as location assistance in terms of retail outlets or accounts. Examples include vending machines, amusement games and display racks.

Franchising has experienced phenomenal world-wide growth over the past 40 years and is of substantial significance to the Canadian economy. It is estimated that franchise businesses account for close to $90 billion in the sales across Canada. In Ontario alone, it is estimated that franchise businesses account for $45 to $50 billion of sales annually, representing 40 cents out of every retail dollar. There are an estimated 500 franchisors and 40,000 franchisees in the province. Many franchise outlets employ 10 to 15 people, representing a significant proportion of the Ontario labour market.

The amount of money typically invested by a franchisee when purchasing a franchise is significant. The Canadian Franchise Association (CFA) estimates that franchise investments range from $25,000 for a “service” franchise which does not include any real property or significant inventory, to millions of dollars for something like a fully equipped hotel. The CFA estimates that the average investment for a franchise involving leasehold property is between $150,000 and $200,000, and between $50,000 and $100,000 for those without leasehold.

Franchising is often portrayed as the proven path to success for entrepreneurs. Unfortunately, statistical information does not exist to support this type of rosy assertion. Surprisingly little accurate or verifiable information is available on the franchise marketplace. This is true both in Ontario and in other jurisdictions. A U.S. government study states that they only available data on the success of franchising is “clearly flawed, misused, self-serving and should be carefully updated and amended”1. Indeed, the U.S. Federal Trade Commission directed one franchise trade show promoter to cease publication of its franchise success statistics because they were misleading. The trade show promoter was requested to post this fact at all its trade conferences. Unsupported success statistics, indicating an 80% success rate for franchised businesses versus an 80% failure rate for new independent businesses, are often quoted in Canadian franchise literature.

It is impossible to develop an accurate profile of the franchise sector in Ontario given the absence of accurate information and data. Canadian governments do not systematically collect information specific to the franchise sector. American census statistics2 suggest, however, that purchasing a franchise business may require a larger investment, and may be associated with a higher business failure rate than non-franchise businesses. A 1993 study found that:

  • 34.9% of young franchised business had failed during 1987-1991 as compared to 28% of non-franchised firms. (Similar and even higher failure rates have been found in other studies commissioned by the U.S. Small Business Administration Office.);
  • Start-up capital for franchised firms averaged $85,293 USD as compared to $30,156 USD for non-franchise businesses.

In addition, the turnover rate for franchisors also appears to be high. A general comparison of Entrepreneur magazine’s list of top 100 franchisors found that 70% of the firms listed in 1987 were no longer listed in 1992. Mergers or buy-outs may account for some of this change.

FAQs

Why is the government so concerned about the business relationship between franchisors and franchisees?
Franchisees generally carry different risks than other business purchasers/investors. In franchise relationships, the franchisee typically invests the bulk of the capital, yet the franchisor has the right to determine how that capital is used. Because many franchise arrangements involve an individual or small business entering into a contractual arrangement with a much larger corporate entity, prospective franchisees have considerably fewer resources and less negotiating leverage to ensure that they obtain the best information possible prior to entering a contract.

Franchisees often make investment decisions in the absence of clear or adequate business information. When an investment “goes wrong’, the financial impact can be devastating. Many franchisees make their franchise purchase from personal or retirement savings, as well as severance packages. Some choose a franchise investment to fulfill a dream of being a small business owner and choose to enjoy both the risks and rewards associated with being one’s own boss. Others may seek a franchise business as an alternative to wage employment.

Wouldn’t having a lawyer review a franchise contract avoid all the problems?
It may help, but franchise contracts are different from other commercial contracts and require a specialized knowledge to avoid problems of legal interpretation. Simply having a family lawyer or financial adivsor review an agreement may not ensure that this major investment decision is fully understood. When a dispute does arise, franchisees typically have far fewer resources and less access to remedies than the franchisor. The time and cost of arbitration or court action are often considerable. Mandatory disclosure would assist in minimizing some disputes that arise through lack of information.

Would disclosure really make a difference?
Not necessarily in every case, but it is estimated that around 5,000 civil cases are filed every year in Ontario relating to disputes between franchisors and franchisees. Although the vast majority of these are settled before going to trial, those that do go to trial typically involve substantial claims. For example, settlement costs in a 1996 dispute are estimated to be around $60 million. Legal, accounting and arbitrator fees in another major dispute were over $1 million. When one takes into account the tremendously disruptive effects on franchisees (and their employees), reasonable disclosure requirements may be very helpful in reducing potential conflicts.

Is the relationship between franchisors and franchisees always a problem?
Absolutely not. Many franchise relationships are cooperative, business-like and mutually advantageous. Nonetheless, they typically involve one party having more influence or control than the other. At the extreme, some franchisors have actually prohibited their franchisees from forming an association or belonging to any trade organization, making it more difficult for franchisees to represent their commercial interests or to work together on issues of mutual benefit. Such constraints on business or personal association are completely unacceptable to the government.

3. The Solutions Proposed
As mentioned in the introduction, the government is proposing several solutions. There is no magical “solution”, however, that can guarantee that every franchise will be a commercial success or that every franchise relationship will be problem-free. That said, the key elements of the proposed franchise disclosure legislation are outlined below.

Statutory Disclosure Requirements
Disclosure requirements would be set out, either through amendment to the Business Practices Act or in new legislation. Franchisors would be required to provide prospective franchisees with disclosure document containing information about the franchisor as well as the franchise offering itself. The disclosure would have to be provided at least 14 days prior to the signing of any agreement or financial transaction. The franchisor’s obligation would include notifying prospective franchisees of any material change which has occurred in relation to the information disclosed, prior to signing or to a financial transaction.

Information About The Franchisor
Franchisors would be required to provide information set out in regulations under the legislation. Disclosure documents would include:

  • Business background of franchisor, directors, general partners and the officers of the franchisor (e.g. ownership, prior experience, length of time franchisor has conducted the type of business to be operated by franchisee).
  • Litigation history involving the franchisor, associates and any directors, general partners and officers of the franchisor (e.g. convictions or pending charges involving fraud, any violation of franchise law, business practice, or unfair or deceptive practices law; injunctive or restrictive orders imposed by or pending administrative actions to be heard before a public agency of any jurisdiction; liabilities in civil action or on any pending actions involving the franchise relationship or involving misrepresentation, unfair or deceptive practices).
  • Bankruptcy or insolvency information.
  • Financial history (e.g. the company’s financial status, audited financial statements).

Information About The Franchise Offer
Franchisors would be required to provide information set out in regulations under the legislation. Disclosure document requirements would include:

  • Costs (e.g. initial deposit for franchise fee and whether or not this is refundable; costs for initial inventory, signs, equipment, leases, rentals).
  • Restrictions (e.g. limitations on the supplier of goods, the goods or services to be offered for sale, the sales territory).
  • Territory (e.g. policies regarding exclusivity of territory and the proximity in which a new franchise may be established).
  • Conditions of termination, renewal, and transfer of franchise.
  • Training and other assistance programs.
  • Advertising Fund (e.g. portion of fund spent on administrative costs, national campaigns, local advertising).
  • Current and former franchisees as well as a statement encouraging the prospective franchisee to seek legal or other advice and to freely contact other franchisees prior to acceptance of the offer.
  • Earnings potential (optional but, if the franchisor chooses to provide this, the information must include reasonable basis for claims, the material assumptions and notice of where the substantiating information is available for inspection by franchisee).

The contents of the proposed disclosure document would be specified by regulation. The regulations would not specify what form the disclosure information must take. Generally, where Ontario has statutory disclosure requirements for businesses – for example, cost-of-credit disclosure, direct selling cancellation rights – it is the content of disclosure that is specified rather than the format of the information. This approach would provide franchisors with the flexibility to use document templates prepared by a business association or under the franchise lew of jurisdictions outside Ontario, such as the Uniform Franchise Disclosure Circular or the U.S. Federal Trade Commission format. As long as all the specific information requirements of Ontario are met, any document format may be used.

Consequences for Non-Disclosure
Failure to provide the disclosure document within the specified time frame or to notify the prospective franchisee of any material change to the disclosure information must carry meaningful consequences.

It is proposed that, in either of these circumstances, the franchise agreement would not be binding upon the franchisee. Specifically, the following rescission rights and obligations are proposed:

If the franchisee has not been provided with the disclosure document at least 14 days prior to signing the agreement, the franchisee may rescind the agreement without penalty or obligation no later than 60 days following receipt of the disclosure document. In circumstances where no disclosure document has been provided at all, the franchisee may rescind the agreement without penalty or obligation no later than two years after entering into the franchise agreement. The franchisee must provide in writing notice of rescission to the franchisor.

Within 60 days of receiving notice of rescission, the franchisor must:

  • refund any money received from or on behalf of the franchisee, other than money for inventory, supplies and equipment;
  • buy back, at the purchase price, any inventory remaining at the date of rescission which as been sold to the franchisee in accordance with the franchise agreement; and,
  • buy back, at the purchase price any supplies and equipment which has been sold to the franchisee in accordance with the franchise agreement.

Franchisees would also be entitled to a right of action against the franchisor to seek compensation for any net losses that the franchisee incurred in acquiring, setting up and operating the franchised business.

Failure to disclose a material fact would be considered “misrepresentation”. Franchisees who have suffered a loss because of misrepresentation in the disclosure information would be entitled to a right of action for damages against the franchisor who provided the information and against the person or persons who signed the disclosure document.

In circumstances where the disclosure document is complete but is subsequently found to have misrepresented information causing the franchisee to have suffered a loss, it is proposed that the franchisee have right of action for damages against the franchisor and any or all the persons having signed the disclosure document on behalf of the franchisor.

Right of Franchisees To Associate
Although the right to associate is considered fundamental, some franchise agreements specifically prohibit franchisees from participating in any group or association of similar franchisees. While many reputable franchisors do not place such constraints on their franchisees, such intrusions on the right of individuals or businesses to associate would no longer be acceptable. The proposed legislation would prevent contractual or other interference in the right to associate and override any such contractual provisions that may still exist. Franchisees would be entitled to a right of action for damages against any franchisor attempting to penalize or threatening to penalize a franchisee for exercising this right.

FAQs

What would these disclosure requirements accomplish?
They would ensure that certain key information regarding the franchisor and offer are disclosed prior to the consumer making an important investment decision. They would also ensure that investors would be provided with pertinent information prior to the signing of a franchise agreement. The proposed disclosure requirements are already used voluntarily by many reputable companies and reflect the voluntary code of standards of the Canadian Franchise Association (CFA). Mandatory disclosure would make it difficult for franchisors to avoid transparency as some currently do.

Does this mean that legal advice would not be needed by franchisees?
No. Obtaining legal advice is prudent and recommended for any business transaction, including franchise agreements. The proposed disclosure requirements would make it easier for franchisees and lawyers to review important information before signing an agreement.

Shouldn’t the legislation make some basic contract provisions mandatory?
Compelling franchise contracts to include provisions for such things as territorial exclusivity or right of renewal would intrude unduly on the freedom of business parties to contract. The proposed disclosure requirements would ensure that prospective franchisees are aware of how the franchisor proposes to approach such contract issues. Prospective franchisees would be in a better position to make an informed decision before negotiating or signing any contract.

Would this mean more red tape for businesses?
No. Many franchisors already provide such information to their prospective franchisees. Mandatory rules would “raise the bar” and ensure that everyone gets the same fair treatment. The disclosure requirements are basically fair marketplace rules – like those governing disclosure of credit interest rates. There would be no additional licensing, permits, government forms or inspections involved – simply a clear set of information obligations enforceable through civil action.

Aren’t the proposed consequences for non-disclosure pretty severe?
Yes, and for several good reasons. First, the disclosure requirements are reasonable, clear and fair. Second, they do not place an onerous burden on franchisors and, in fact, reflect the best practices that already exist in the industry. Anyone found to have avoided disclosure or to have misrepresented material information is likely to have done so purposely at the expense of a small business. Third, franchisees undertake considerable financial risks and should not have to bear all the costs if a franchisor has misled them into a bad investment.

Would the disclosure requirements apply to every type of franchisor regardless of how small or large the nature of the business?
Like in other jurisdictions, Ontario’s legislation would leave out certain business arrangements which are not commonly considered a franchise. For various reasons – such as the small amount of money or magnitude of the investment level – some “franchisors” just don’t make sense to include. The types of franchise arrangements to be covered, excluded or exempted are described in the next section.

How would Ontario’s disclosure requirements compare with other jurisdictions’?
Ontario’s proposed legislation is similar to the key provisions in Alberta (the only province currently with franchise legislation). It also compares with the United States Federal Trade rules, which apply across the U.S. One of the benefits of having very similar legislation is that franchisors who operate in several jurisdictions find it easier to comply with.

Alberta’s legislation includes a “fair dealing” duty. Will Ontario include this too?
The inclusion of a duty of fair dealing that is left to the courts to define is problematic and costly. All jurisdictions involved in this area agree that pre-sale disclosure is the crucial need. Industry groups such as the Canadian Franchise Association are well placed to develop codes of practice for members that would promote fair dealing in a meaningful way.

Was mandatory arbitration considered?
Yes, it was carefully considered, but many franchisees and franchisors expressed a concern that compulsory arbitration was potentially costly and not always useful. No single method of dispute resolution should be made mandatory.

4. Proposed Definitions
The disclosure requirements would apply to all “traditional franchises” (business-format or product franchises) that meet each of the following criteria:

  • Use of trademark, where the franchisor provides the right to distribute goods or services that bear the franchisor’s trademark, service mark, trade name, advertising or other commercial symbol; and,
  • Significant control or assistance, where the franchisor exercises significant control over, or offers significant assistance in, the franchisee’s method of operation. Control or assistance would include, but not be limited to, such things as buildings design and furnishings, locations, training, marketing techniques; and,
  • Payment, where the franchisee is required to make payment to the franchisor, or a commitment to make a payment, as a condition of obtaining the franchise or commencing operations.

The disclosure requirements would also apply to a second category of franchisor known as “business opportunities”, where each of the following criteria would apply:

  • Representational or distribution rights (where no trademark may be involved), and the franchisor simply provides the right to sell goods or services supplied by the franchisor or a supplier which the franchisor requires the franchisee to use; and,
  • Location assistance is provided, where the franchisor secures retail outlets or accounts for the goods or services to be sold, or secures locations or sites for vending machines or display racks, or provides the franchisee with the services of someone to do the above; and,
  • Payment, where the franchisee is required to make payment to the franchisor, or a commitment to make a payment, as a condition of obtaining the franchise or commencing operations.

The disclosure requirements would also apply to a second category of franchisor known as “business opportunities”, where each of the following would apply:

  • Representational or distribution rights (where no trademark may be involved), and the franchisor simply provides the right to sell goods or services supplied by the franchisor or a supplier which the franchisor requires the franchisee to use; and,
  • Location assistance is provided, where the franchisor secures retail outlets or accounts for the goods or services to be sold, or secures locations or sites for vending machines or display racks, or provides the franchisee with the services of someone to do the above; and,
  • Payment, where the franchisee is required to make payment to the franchisor, or a commitment to make a payment, as a condition of obtaining the franchise or commencing operations.

Exclusions From The Disclosure Requirements
Franchise arrangements take such a wide variety of forms that a few exclusions are needed to avoid confusion. It is proposed that the term “franchise” exclude any continuing commercial relationship created solely by:

  • Employer-employee and general business partnership arrangements; or,
  • Membership in a bona fide “co-operative association”, such as agricultural co-operatives; or,
  • Agreements with certification/testing services which authorize the use of certification mark to any business products or services meeting their standards, such as the Canadian Standards Association or Underwriters Laboratories; or,
  • Agreements between a licensor and a single licensee to license a specific trademark, such as use of a logo on a product.

Exemptions From The Disclosure Requirements
Like other jurisdictions, a few exemptions, by regulation, from the disclosure requirements are proposed with the intention of recognizing some unique business arrangements that would otherwise be considered a form of franchise. Individuals or firms would be exempted if they meet any of the following criteria:

  • Minimum investment: if payments to be made to the franchisor within six months of the franchise start-up are less than $500 (e.g. most direct selling arrangements): or
  • Fractional franchises: relationships adding a new product or service to an established distributor’s existing products or services would be excluded if the sales from the franchise represent no more than 20% of the franchisee’s sales in dollar value (e.g. a hardware store agrees to become a distributor for an agricultural vehicle manufacturer for a specified geographic area); or,
  • Leased departments: relationships in which the franchisee leases space in the premises of another retailer and is not required or advised to buy the goods or services it sells from the retailer or an affiliate of the retailer; or,
  • Oral agreements: where there is no writing which evidences any material term or aspect of the relationship or arrangement: or,
  • Crown entities: service contracts or franchise-like arrangements between crown entities and other parties are typically subject to public tendering, procurement guidelines, freedom of information or specific statutory provisions, which do not apply to franchise arrangements between private parties.

It is also proposed that, by regulation, any franchisor be exempted from the legislation where the franchisee would be considered a “sophisticated investor” by participation in an investment above a monetary threshold of $5 million – well in excess of most small business arrangements. The average franchise investment for a single retail outlet is thought to involve between $50,000 and $500,000 depending on property arrangements. This provision would recognize circumstances where both parties to a franchise agreement are typically significant and experienced corporate entities and engaged in an investment well above that of most business format or product distribution franchises. Examples of business arrangements in this category could include sports or hotel franchises, airlines or aircraft manufacturers.

FAQs

Why have any exclusions or exemptions?
The government’s primary objective is to ensure that small business investors have access to information that will help in making an informed business decision. It is the small business person who has proven to be the most at risk and least likely to have the experience or resources of a major corporation. The individual or family buying a restaurant or other form of retail outlet with their personal savings is a greater concern to the government than a major company buying into something like a national or international hotel chain.

Will the government consider adding or removing proposed exclusions or exemptions?
Certainly, if it makes sense to do so, although a franchisor would need to offer a very convincing rationale as to why the proposed disclosure requirements are so onerous that they should be excluded or exempted.

What if a franchisor already provides everything the proposed legislation would require?
Best practices in business should always be applauded and the government is aware that some franchisors already do have practices in line with the proposed requirements. In these cases there is virtually nothing new a franchisor would need to do, consequently there would be nothing they need exempting from.

5. Information Collection
Discussions with various franchisor and franchisee groups reveal a startling fact – everyone agrees that very little is known about what is really going on in the marketplace. It is clear that there are a growing number of franchises and that franchise arrangements are diversifying, but accurate statistics do not exist. The Franchise Sector Working Team suggested that a registry could be very useful. Existing federal or provincial business registration/filing requirements do not currently identify whether a firm is a franchise arrangement of one form or another. Such information could be very useful in:

  • aiding current and potential franchisors to identify the trends in market segmentation and geographic differences;
  • supplying prospective franchisees with an accurate picture of market opportunities, the number of potential competitors, the various market entry and exit rates;
  • providing information useful to groups like financial institutions, to assess risk and lead to more competitive financing opportunities.

Several ideas have been explored in relation to the systematic collection of “tombstone” information on franchisors and franchisees in Ontario. One alternative considered was the addition of a new registration requirement for both franchisors and franchisees under the proposed legislation. While this would undoubtedly provide the data, several problems are associated with this approach. Such a new registration requirement would not make the proposed disclosure provisions any more effective. As well, experience shows that some sanction or penalty would be needed in order to ensure that firms actually register.

A second and preferred approach would be to look at how to adapt the current business registration and filing requirements under the // Corporations Information Act //, // Business Names Act // and the // Limited Partnerships Act //, to “automatically” collect information necessary to identify whether the business is a franchisee or franchisor and the type of franchise activity.

This approach could include the federal government, which also collects data under federal business registration or bankruptcy/insolvency filings. Over time, this would achieve the same results offered by a new registration system, but avoid the costs and added burden of yet one more statutory registration/filing procedure. Views on the best approach are sought in this consultation.

FAQs

Couldn’t an industry association be responsible for registering all franchisees and franchisors in the province?
Certainly, many business or industry associations survey their members and collect data as part of their activities. However, there are no business associations that have statutory authority to do so, which would amount to a mandatory form of membership. Small businesses do not have to register with the Ontario Chamber of Commerce even though most are required to register or file under the Corporations Information Act or Business Names Act. Franchising is a business format rather than a definable sector of commercial activity. Franchise businesses may be represented by a wide range of business associations and organizations.

Why not compel franchisors and franchisees to submit disclosure documents and franchise agreements to the government?
The government is very proud of its record in reducing red tape and focusing on core business activities. In fact, the government has eliminated unnecessary and costly filing requirements. It is very doubtful that Ontario’s businesses would appreciate the addition of a requirement to file commercial documents with the government.

6. Your Turn to Comment on the Proposed Franchise Disclosure Legislation
For your convenience, the following questionnaire is provided. Alternatively, you may fax, E-mail or mail comments to the address on the next page.

1. Does the proposal to require pre-disclosure of franchise information make sense?
 Yes  No  Not sure

2. The specific disclosure requirements are appropriate.
 Yes  No  Should be different
Please provide suggestions:

3. The consequences for non-disclosure are reasonable and fair.
 Yes No  Should be harder  Should be softer
Please add comments or suggestions:

4. Franchisees should be able to freely associate with other franchisees.
 Agree  Disagree  Not sure

5. The objective of disclosure legislation is to ensure that small business investors are better informed. Do the proposed definitions sound reasonable?
 Yes  No  Should be changed
Please provide suggestions:

6.The proposed exclusions make sense.
 Yes  No  More exemptions needed  Fewer exemptions needed

7. The proposed exemptions make sense.
 Yes  No  More exemptions needed  Fewer exemptions needed
The following types of business activities should be exempted/not exempted:

8. Basic information on franchisees and franchisors should:
 be collected through a new business registration system
 be collected as part of an existing government business registration system
 be collected through other means (surveys, polling, etc.)
 not be collected at all

Please tell us your name (optional):
Are you:

 a franchisee, type of business:
 a franchisor, type of business:
 an other form of business or association, please specify:
 an individual

Did you find this consultation paper informative?
 yes, very  yes, somewhat

 no, not really  not at all

Was the consultation paper clear and easy to read?
 yes, very  yes, somewhat

 no, not really  not at all

Please mail or fax your response by August 15, 1998 to:

Franchise Disclosure Consultation
Ontario Ministry of Consumer and Commercial Relations,
Policy and Agency Relations,
35th Floor, 250 Yonge Street,
Toronto, Ontario, M5B 2N5
Fax: (416) 326-8885; E-mail: ac.no.og.rcc.me|ofnircc#ac.no.og.rcc.me|ofnircc

Endnotes
1. Franchising in the Economy, U.S. Department of Commerce, 1988.
2. A study released in December 1993 by Dr. Timothy Bates based on U.S. Census data.


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franchisees, Franchise Sector Working Team, Franchises aren’t selling, Franchising a crown corporation, Franchisor association still maintains fiction of representing franchisees, Franchisor bankruptcy, Franchisor held personally liable, Franchisor overcharges for required products, Franchisor tries to break franchisee association "union", Franchisor's associate, Franchisors want the minimum regulation they can get away with, Fraud, Fraudster franchisor, Fraudulent non-disclosure, Frenzied lobbying, Futility of taking legal action, Government as system’s ultimate liar, Have needed more statistics for +30 years, Hefty severance packages, Hidden agenda, Horror stories are merely anecdotal, How much cash you put in at 1st is irrelevant, I own the assets but the franchisor controls them, Illusion of government oversight, Imbalance of information and power, Incompetent or predatory: for the small business investor, the outcome is the same, Independent businesses much higher profit than franchised ones, Independent businesses survive longer than franchised ones, Industry in disrepute, Industry likes this regulator, Industry research lacks independent verification, Influence-peddling, Investor confidence crushed, no trust or buying, Law grinds the poor, and rich men rule the law, Life savings gone, Low investor confidence, Mandatory membership in associations, Mask of respectability, Material facts were not disclosed, McLaw: toothless legislation designed to protect the dominant parties, Ministry of Government and Consumer Services, Ontario, Misrepresentations, Mom-and-Pop franchisees at greatest risk, Money influencing public decision-making, Must buy only through franchisor (tied buying), Next to impossible to sell any franchise, No justice in legal system for franchisees, No program evaluation being done by government, Old-fashioned idea that politicians are relevant, On Cooling the Mark Out (Erving Goffman), Opportunism: contract creates powers which are used to strip investor value during relationship, Overt influence of trade association, Perception of lower business risk, Politicians helping their friends, Politicizing the public service, Private right of action, Protect gross negligence, wanton recklessness and intentional misconduct, Proven business model, Public perception of sleaze and greed, Public service as a high calling, Raining litigation, Rate of return on investment, Register franchisees and franchisors, Regulatory capture breeds its own incompetence, Renting a business causes problems down the road, Rescission, Retirement savings gone, Right to associate, Right to associate and right to harass, Risk much higher for franchisee than independent business, Severance package financing dream, Short- or forced-shipping, Should anyone trust anything associated with franchising anymore?, Signs that potential franchisees are nervous and aren’t buying, Sincerity, Sold only to people with no small business experience (very naïve), State refuses to even listen, State sanction, Success rate, Timothy Bates’ study, Success rates fudged, Sunk costs: franchisee's trapped capital keeps them chained to treadmill, Supply margins are a hidden added royalty payment, Tied contracting, Professor Timothy M. Bates, Toothless law, Tougher to sell franchises, Trade association fronts and defends best and worst franchisors, Trade association membership a bogus "Good Housekeeping Seal of Approval", Trade association propaganda, Undue influence, Uniform Franchise Offering Circular, UFOC (FDD), Unsophisticated buyers, U.S. Federal Trade Commission, FTC, Vacuum of information favours dominant party, Weak law worse than no law, When the franchisor tanks, so does the franchisee, Who pays for the research?, Trade shows a major source of revenue for franchisor associations, Trade show are where the greatest lies are told, Universities are in the business of pursuing objective truth, Universities provide unbiased expert knowledge, Canada, 19980601 Ontario franchise

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