Committee to study Franchise Act

For many, a franchise can look like a licence to print money, but, too often, it can turn into a mirage — and the dream of running your own business can be a nightmare from which there is no escape.

The London Free Press
February 8, 2000

Committee to study Franchise Act
Paul Berton

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

For many, a franchise can look like a licence to print money, but, too often, it can turn into a mirage — and the dream of running your own business can be a nightmare from which there is no escape.

If you think this is simply sensationalism, consider that there are 5,000 new lawsuits involving franchisees each year in Ontario.

"That should be a red flag for anyone who has concerns about this sector of retailing,'' says Tony Martin, an MPP for Sault Ste. Marie and the NDP critic for small business.

It is becoming increasingly obvious many franchise owners are not happy.

To give you an idea of the scope of the sector, here are a few more facts.
- 40,000 people own franchises in Ontario.
- 45 per cent of all retail sales in Ontario took place in franchises.
- 600,000 Ontarians are employed by franchises.
- $4 billion or more is invested by franchisees each year in Ontario.

That sheer size and the increasing problems are the reason an all- party committee of the legislature is visiting London next month. It wants to hear from franchisees, franchisors or anyone else who has some thoughts on the business — and how it might be improved. If you think you can help, you must register by Friday.

It's all aimed at improving Bill 33, the Franchise Disclosure Act, which is designed to let potential franchisees know more about what they're getting into. Les Stewart, president of the Canadian Alliance of Franchise Operators (CAFO), says Bill 33 can be improved and he believes the government agrees.

"Bob Runciman (minister of consumer and commercial affairs) wants to have a good hearing," Stewart says. "He wants the whole story." Bill 33 has in fact already had a first reading in the legislature and now it's being taken on the road to Sault Ste. Marie, Ottawa, London and Toronto. This is the first time any bill has gone to public hearings after first reading and the first time the franchising sector has been examined in this province since 1971.

"We think it's high time it was acknowledged there are some issues, '' Stewart says. Among the improvements Stewart would like to see is better access to information about franchising. He thinks potential franchisees should know how many previous owners a franchise has had and what its turnover rate has been.

As well, he thinks the bill should more clearly define "fair dealings," rather than leaving it to the courts to interpret, as is now the case. Franchisees don't have the resources that franchisors do to fight a court battle.

"What makes the franchise business unique is that franchisee owns all the assets, but the franchisor controls them,'' Stewart says. Franchising isn't so attractive without reason. For many, it can be extremely rewarding — and it's easier in many respects than starting from scratch.

After all, the franchisor has already done the bulk of the work – research and development, marketing, advertising, equipment, locations, systems, suppliers … .

That may be why "most franchise purchasers are novices,'' Stewart says.

And it may only underline why the playing field should be levelled. "We need to give the little guy some clout,'' says Martin, a committee member. In the end, changing the disclosure rules won't protect all franchisees, but it should help some. With this many issues in the courts, the examination is well worthwhile.

Public hearing
What: Public hearings on Bill 33, the Franchise Disclosure Act.
When: March 9, but the deadline is Friday.
Where: Hilton London.
To register: Call committee clerk Anne Stokes at (416) 325-3515.


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Risks: Tony Martin, Political champions, 5,000 new lawsuits per year in Ontario, Canada, Bill 33, Les Stewart, Canadian Alliance of Franchise Operators, CAFO, Ministry of Consumer and Commerical Services, Ministry of Consumer and Business Services, Ministry of Government and Consumer Services, Ministry of Government Services, Ontario, Churning (serial reselling), Imbalance of information and power, Justice only for the rich, I own the assets but the franchisor controls them, Canada, 20000208 Committee to

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