New franchising law called sales job

“This is the wooliest thing I’ve ever seen,”…Commercial Relations Minister Dave Tsubouchi “is just like one of the franchise hustlers,” said Stewart. “He’s selling an idea and there’s nothing in it.”

The Toronto Star
December 5, 1998

New franchising law called sales job
Ignores ongoing illicit practices, operator rep say
John Deverell

A franchising law proposed by the Mike Harris government this week offers no end to the scams and ripoffs that give the industry a bad name, a leading critic says.

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

“This is the wooliest thing I’ve ever seen,” said Les Stewart of Barrie, leader of the Canadian Alliance of Franchise Operators.

Commercial Relations Minister Dave Tsubouchi “is just like one of the franchise hustlers,” said Stewart. “He’s selling an idea and there’s nothing in it.”

Franchising is a major business form in Canada with about 1,400 franchise systems, 76,000 franchise operators and $100 billion in sales.

It encompasses everything from big, mature and successful systems such as McDonald’s and Tim Hortons to dozens of little retailers with a dream.

Many established and competent franchisers are members of the Canadian Franchising Association, which represents about 30 per cent of the systems in the marketplace.

But some predators specialize in selling dreams and churning franchises, separating one would-be entrepreneur after another from their life savings. The Canadian Franchise Association has said it supports the Ontario legislation, saying it reflects rules that its own members voluntarily follow. Association members represent about 30 per cent of Canadian franchisor companies.

“The legislation will extend these high standards to all franchisor companies operating in Ontario,” association president Richard Cunningham said.

Tsubouchi’s bill aims to require fair dealing and meaningful disclosure by a franchisor to a prospect before any contract is signed; and a 14 - day cooling off period during which a franchisee can withdraw from a deal.

But a big hitch with the law, critics contend, is that it provides no new enforcement mechanism to deal with franchisee problems that emerge more than 60 days after a contract is signed.

Civil litigation, already available, is no answer for tapped out franchisees who can’t afford the further burden, said Stewart.

The Ontario bill will be worthless, he said, unless amended to include a public registry of franchisor disclosure documents, including a detailed listing of failures; and an investigative commission, such as was recently created in Australia, to look into and prosecute illicit practices on the basis of complaints from franchisees.

“To get at the problem, the government has to take over the burden of enforcement,” Stewart said.

Earlier this week, he appeared at a demonstration of ex-franchisees at a pizza parlour near Maple Leaf Gardens that changed hands five times in 18 months and now stands empty.

A number of the protesters were newcomers from Iran who had hoped to buy a toe-hold in a new country.

“We’ve got to stop them taking advantage of the immigrants,” said Fereshteh Vahdati, who with her husband put nearly $100,000 into two pizza operations and lost it all.


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