Letter to the Editor

It is my experience, that the financial and personal risks associated with franchising are seriously understated in the June article, “Lawn & Landscape Takes a Look at Franchising”…However, his assertion that franchising is a predatory practice fraught with lawsuits is not just a jaundiced view of the concept, but one that tarnishes the reputations of the hundreds of thousands of honest business owners…

Lawn & Landscape Magazine
November 1, 1998

Letter to the Editor
Les Stewart

Canadian%20Alliance%20of%20Franchise%20Operators%20Les%20Stewart.jpg

To the Editor:

It is my experience, that the financial and personal risks associated with franchising are seriously understated in the June article, “Lawn & Landscape Takes a Look at Franchising”. As someone who operated a lawn care franchise for 4½ years and now operates an independent lawn care firm, I caution any independent lawn care operator about franchising.

Franchising creates long-term, far reaching legal obligations on the part of the franchisee. Although there is protective legislation in 38 states, this relationship is enforced through very complex documents called franchise agreements that often result in lawsuits when disputes arise during the contract.

If you are seriously considering a franchise, contractors should get specialized, unbiased franchising-specific advice. I have found the American Franchisee Association, which has monitored the franchise industry for 30 years, to be of great practical assistance (312/431-0545).

How common are the problems? One indication is the level of litigation in all industries that offer franchises. The Ontario government recently stated that 5,000 lawsuits were started in 1997 that involved franchising. With only 40,000 franchisees in operation, that means more than 12 percent of all Ontario franchises are involved in new litigation.

Legal problems in franchising are well documented. Contractors interested in franchising should protect themselves and their families by: taking their time, talking to many existing and former system franchisees and getting advice from associations that monitor franchising from a franchisee/investor viewpoint. Like most things in life, if it seems too good to be true it normally is.

LES STEWART
FOUNDER
CANADIAN ASSOCIATION OF FRANCHISE OPERATORS

The franchise industry responds [to Stewart's original letter]

To the Editor:

Success in franchising is built on a cooperative relationship between a franchisee and a franchisor. Mr. Stewart is correct that those considering this form of livelihood should get expert advice, take the time needed to investigate the system they want to join and apply the concept of caveat emptor.

However, his assertion that franchising is a predatory practice fraught with lawsuits is not just a jaundiced view of the concept, but one that tarnishes the reputations of the hundreds of thousands of honest business owners – franchisees an franchisors – who successfully employ this strategy as partners.

Mr. Stewart’s claims that more than 5,000 lawsuits involving franchises were started in Ontario in 1997 alone is unsubstantiated.

Attorneys of leading Canadian franchise lawn [sic] firms expressed doubts. Frank Zaid, senior partner of Osler Hoskin & Harcourt of Toronto, said “Based on our experience, I can’t see how there would be that number of lawsuits.” Alex Konigsberg, partner at the Montreal firm Lapointe Rosenstein said the claim “bears no relationship to reality.”

In the U.S., at least, all one needs to do is read the Uniform Franchise Offering Circular to determine if a particular company is lawsuit-prone.

I urge those eager to enter franchising to do due diligence in their choice of associations as well. If one seeks unbiased, balanced and comprehensive information about franchising, avoid any organization specifically representing one side or the other.

The “franchisee-only” association Mr. Stewart recommended represents only one side of the franchise partnership and promotes increased government intervention in franchising, which inevitably leads to more red tape and taxes for owners.

Perhaps it was the International Franchise Association (202/628-8000) that Mr. Stewart had in mind when he suggested an organization that has a long history of advocating fairness in franchising. IFA is nearly 40 years old, but more importantly, represents both franchisees and franchisors. Plus, IFA’s members abide by its stringent Code of Principles and Standards of Conduct, a set of guidelines promoting third-party mediation instead of lawsuits.

Buyer beware, Mr. Stewart? Yes, and seller beware as well. That’s why the contract they sign is called an agreement.

RUSSELL J. FRITH, PRESIDENT
LAWN DOCTOR, INC.

NOTE

Lawn Doctor is, by a wide margin, the most powerful franchised lawn care system in North America.

System Number %
Lawn Doctor 350 44.4
Weed Man 135 17.1
Spring Green 105 13.3
Nitro-Green 45 5.7
Naturalawn 42 5.3
Nutri-Lawn 38 4.8
Liqui-Green 27 3.4
U.S. Lawns 24 3.0
Scott’s Lawn Care 22 3.0
Total 788 100.0

SOURCE: “Players in the Franchise Game”, Lawn & Landscape magazine, June 1998 (the pre-eminent trade magazine for the lawn care industry in North America).


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Risks: Alpha Male attorney, American Franchisee Association, AFA, 5,000 new lawsuits per year in Ontario, Canada, International Franchise Association, IFA, Canadian Alliance of Franchise Operators, CAFO, Raining litigation, General counsel, CFA, Canada, United States, 19981101 CAFOs letter

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