Tony Martin Opposition Statement

We went to the banks as well to see if we could get some information on this, what statistics there are as to how many franchisees went under and failed and what impact that had on them, and that information wasn't forthcoming either. They either didn't have it or they weren't willing to share that information with us. I suggest to you that certainly in my experience banks have information on everything. There isn't a thing I do in my life that my bank doesn't know about. In conversation with those institutions as a person trying to get a loan to buy a car or whatever, I soon find out to what degree of detail they have information on record about me, so I find it strange, in a circumstance where you have significantly more at stake and significantly more generous financial dealings and relationships than perhaps I would enter into, that there isn't that kind of information available.


Legislative Assembly of Ontario
March 6, 2000

Opposition Statement
Toronto, Ontario, Canada
Mr. Tony Martin, MPP, NDP Critic

Standing Committee on Regulations and Private Bills
1st session, 37th Parliament

Consideration of Bill 33, An Act to require fair dealing between parties to franchise agreements, to ensure that franchisees have the right to associate and to impose disclosure obligations on franchisors


The Acting Chair (Mr George Smitherman): I'd like to now call on Tony Martin for the opposition statement.

Mr Martin: I want to start out by saying how happy I am that we're here today considering this piece of legislation. You're right, it has taken far too long. Other governments, including my own, didn't do the right thing when they had the opportunity to move aggressively forward to put in place legislation that would have covered this area. Perhaps today, had they done that, we would be looking at further legislation, having had some experience under our belt of how the legislation that is being proposed today may not actually have done the job. So I'm appreciative of the effort of the government and of the work that has been done by previous governments.

In fact, there has been a lot of work done by a lot of people over quite a period of time who recognized that there are some difficulties in this area of business dealings in the province. The initial concern raised and studied, entered into, goes back as far as the late 1960s, early 1970s and perhaps further. That's where I picked up a piece when I got into this, and I'll talk in a few minutes about my actually getting into this piece of work and how it evolved out of some difficulties that some of the small business folks in my own town of Sault Ste Marie got into.

Back in the late 1960s and early 1970s, under the leadership of the government of the day, a predecessor of the present government, one Arthur Wishart, a Conservative MPP for Sault Ste Marie, who was the Minister of Financial and Commercial Relations, commissioned a report, and it came back and was named the Grange report. In it there was reference to doing some things by way of legislation to deal with the evils of franchising. I suggest to you that many of those same evils continue to exist today because no regulation has been put in place and because the industry, or the franchise sector of industry, in Ontario has grown so substantially since then. So, for me, it goes back quite a bit further than either the effort made by the Bob Rae government and Marilyn Churley between 1990 and 1995 and then the work that was carried out subsequent to that, from 1995 to now by the present government, initially Mr Sterling, then Mr Tsubouchi and now Mr Runciman.

Having said all that, I'm just very happy that we're here today and actually have the opportunity to look at a piece of legislation that has been proposed and presented and to hear from folks who have had direct experience in franchising across this province, to hear from folks who have acted on behalf of franchisees and franchisors and to hear from some people who don't have a vested interest but who simply are coming to share with us some of the work they've done in studying this very important relationship over a period of time now. I'm hopeful, as we move on, that the co-operative nature of the discussion to date with Mme Boyer, Mr O'Toole, the minister and others whom I've had the privilege to interact with over this legislation will continue, that we will work together to find a way to do what is best for the industry, and I would suggest particularly for franchisees, who tend to be struggling at this point in time, no matter how you look at it, under some duress, and who are looking for some relief and some vehicle they could use to redress some of the issues that they see challenging them as they try to be the best they can be and to contribute in a constructive and positive way to the economy of the local area in which they operate.

So I guess my hope, to all of the members of the committee, is that we will continue to work co-operatively to find a way to do at this particular junction what is necessary, recognizing that there has been some experience that we can look at.

We can certainly look at the Alberta legislation, and I referenced it a few minutes ago. It's very similar to the legislation that's being proposed here today by the government. Many who have watched that and participated in Alberta in franchising will tell you that it really hasn't changed the lay of the land that significantly. We still see significant numbers of franchisees going before the courts to have disputes resolved, and any effort at mediation before getting to the courts has not been successful. It is in fact costing some of these small business entrepreneurs, who in many instances have already lost their investment and are already in debt up to here. They are now having to come up with money they don't have in order to pay lawyers and to pay for court proceedings that at the end of the day in most instances don't turn out in their favour anyway, because they can't outlast the deep pockets of the franchisor systems and really can't in the end afford the cost of the kind of lawyer in many instances it would take to take on the battery of lawyers that often face the franchisor when he shows up in court, sometimes by himself or herself but most often with a lawyer he can't afford.

There is also a wealth of information that we can look at and we'll hear about in the US experience. There aren't any jurisdictions left, I don't believe, in the US experience that aren't covered by some regulation or other. We will hear this morning from Ms Susan Kezios, who has a tremendous wealth of knowledge and understanding of what's going on in the US and those jurisdictions re best practices, what legislation is in place. They've had legislation in place actually for 30 years. We're only playing catch-up now. My concern, having listened to the policy analyst from the ministry, is that we will put in place legislation that will be akin to what the US put in place 30 years ago and that it will only be 30 years down the line that we will come back again to perhaps revisit this issue and actually do then what we had the opportunity collectively to do now for a very important sector of business in our communities across the province.

I don't think anyone will deny that we have a problem, that we have a situation akin to, in my view, and this is probably fairly biased, David and Goliath, where you have franchisees going up against franchise systems that have not lived up to, in any way, shape or form, that which was presented to them in what I term the courting period before they actually signed the agreement that they signed to do business together. It's my understanding that when two people go into business together it should be a relationship where each has an opportunity to realize the potential to make a livinga good livingif they work hard, if they bring their intelligence and their brain to the job, if they do all the due diligence that's required and keep up with the best practices in the business; that in fact they will be successful, and that if a franchisee is successful it makes sense, then, that the franchisor would also be successful.

But we see too often today in Ontario as we read the reports that are coming out in some of the newspapers—and you'll have to look to the news outlets for that kind of information, because I had our research people at Queen's Park do some work for me in preparing for today's hearings, and they tell me that a lot of the information I would have needed in order to make the kind of case that's required to call on the government to introduce legislation that goes a lot further than what's being proposed doesn't exist. Even the Ministry of Consumer and Commercial Relations, who should be keeping track of complaints by franchises to the ministry, has not been doing that. That information isn't available, or, if it is available, there would be a fairly long-drawn-out piece of work to do in order to get that information. It isn't available.

I share with the committee - we'll circulate this later - a note that I got from a research officer of the Legislature here to indicate that the kind of information I required, that I wanted, so that we could take a look at exactly what the nature of the complaint is and what we could do by way of this legislation to resolve some of those complaints, is just not available. There will be a document circulated later that you will get that will speak to that.

It's also obvious to us from inquiries that we made to banks, that happen to be another of the major partners in this piece of work that's going on, that banks tend to be, at the end of the day, one of the institutions that gain very generously from some of the dealings between franchisors and franchisees in that most franchisees have to go at some point to the bank for a loan to top up or even, in some instances, to get the money in the first place in order to enter into the agreement that franchisees want to enter into so they can participate in this business. Banks, at the end of the day, also happen to be one of those players when it comes to a default or a bankruptcy or a failure of a franchise system, so where in many instances the franchisee ends up in some pretty dire straits at the end of the day, it's normally the franchisor and the bank who do everything in their power, with the power and resources they have, to make sure that their interests are protected.

We went to the banks as well to see if we could get some information on this, what statistics there are as to how many franchisees went under and failed and what impact that had on them, and that information wasn't forthcoming either. They either didn't have it or they weren't willing to share that information with us. I suggest to you that certainly in my experience banks have information on everything. There isn't a thing I do in my life that my bank doesn't know about. In conversation with those institutions as a person trying to get a loan to buy a car or whatever, I soon find out to what degree of detail they have information on record about me, so I find it strange, in a circumstance where you have significantly more at stake and significantly more generous financial dealings and relationships than perhaps I would enter into, that there isn't that kind of information available.

I will be sharing with the committee as well today some information that was gathered from the banks, some of the questions we asked, and then some of the answers we got, which were primarily: "We don't have any answers. We don't keep those kinds of statistics, and that kind of detailed and specific information isn't readily available." That makes it difficult for us to do this job and to make the case we need to make here that in fact there are some problems in the industry of a significant financial nature. I'll be circulating that to you all in a little while as well, so that you can have that at your disposal.

Having said all that, not being able to get the information from those sources, it was incumbent on me to do the job that I think is required of me in this instance. I've been working at this legislation now for some five years, brought into it by some experience in my own community where now we have at least three very successful, very important, very good corporate citizens in my community who are no longer doing business because the parent company decided they wanted to do something different and those particular franchisees didn't fit into the plan.

We could have a long conversation about why the corporation didn't feel they fit into the plan, or my perspective on why they thought they didn't fit into the plan, but the long and the short of it is those people are no longer in the business that they wanted to be in, that they had invested life's savings in, that they had borrowed money to be in, that they were actually very successful in. In the instance I'm sharing with you, of franchisees in my own community being damaged by the unilateral decision of franchisors, we had three people who had started out in the grocery business, stocking shelves, carrying out bags of groceries and had worked their way up to become the best they could be in the business. They loved the business.

As a matter of fact, I was talking to one of them just a couple of weeks ago and she was indicating to me, even though she has gone on to do something else now, that she misses terribly the work that she used to do. Some of the missing that she was doing wasn't quite as tangible as others, but she loved the work that she did and was very good at it. She took a business that was doing under $1 million worth of trade in a year to well into the millions of dollars of trade, but was at the end of the day deemed by the franchisor as not successful enough, as not fitting into the corporate image that they wanted to project and not sophisticated enough, perhaps because she comes from a town not quite as big as Toronto, Sault Ste Marie. We tend to think we're fairly sophisticated up there, but in the eyes of this particular chain that wasn't the case. So she's not in that business any more.

If somebody, though, was looking for information on any one of those three circumstances, you would not find it in the files of the Ministry of Consumer and Commercial Relations. You probably would not get that kind of information even from the banks they dealt with. You probably would get it if you went to their lawyers - you certainly wouldn't get it from them today, because each one of them has signed the infamous gag order. That is something we'll talk about, hopefully, here over the next few days as well. They cannot speak to us. Some of them will appear before us this week, some of them incognito, in camera, because they are still afraid even though we have immunity here - anybody who participates formally and officially at a standing committee of the Legislature has immunity, the same as we do, to ask questions as we feel free and to say what we like. They're still not comfortable in coming forward, because they know one way or another they can be got at and their life can be affected by doing that. We wouldn't be able to get that information from them even by going to them and asking them specifically to share with us what happened and what went on, because they are under the threat of legal action if they share that with us.

So we had to go to the press and in fact some of you may be aware of an organization called the Canadian Alliance of Franchise Operators and Les Stewart, who was himself a victim of a system and continues to be one of the most effective advocates that I've come across in my dealings in this area. He and I have put together a couple of documents, two of them, an A and a B here, that I'm going to be sharing with all of you. This is a compilation of the stories that have appeared in the media over the last five to seven years in Ontario. It's massive and if you look at the front pages of both documents, there are some interesting trends as to the ups and downs in the business.**

Interestingly enough, there was a real flurry of activity around the 1993-94 period, when the Pizza Pizza battle was brewing. All kinds of material and information was being written and reported on. Then a suit was launched, and one of the people writing the articles, particularly for the Toronto Star, was chilled out and no longer wrote on this business any more. So the number of articles that appeared was significantly reduced, which indicates to you the kind of pressure tactics and intimidation that go on and are going on out there when somebody actually has the temerity or the intestinal fortitude to bring something forward and challenge the system and even go public with it. These two documents speak of the terrible experiences of some 4,600 families in this province who have been damaged by their relationship in franchising. I suggest to you that it's only the tip of the iceberg, because only a small number actually come to the surface and get the exposure that some of the folks in here have had. Some 5,000 franchisees are before the courts in Ontario every year. That should say something to all of us here as to the seriousness of the work we do and the challenge in front of us to go much further than what is proposed in the bill that has been tabled, even though I believe it is a very serious and good start to the conversation.**

We need to get beyond just the requirement to disclose; we need to get into actually regulating the relationship once it begins to unfold. We need to define more clearly the issue of fair dealing. I suggest to you that if we don't define it, it will be defined in the courts at the expense of the franchisees, who will end up carrying the freight and paying for it, because it is in their best interests to have that definition honed and in place. It won't be the franchisors who will bring that forward and pay the freight to have that done.

So there is a lot of work that we need to have done. I'm happy and excited that we are here today actually taking that next step to have that done. My hope is that all of us who have worked so co-operatively to this point to get it to where it is, including the minister, take it around the province - Sault Ste Marie, Ottawa, London - so we can hear from folks on their home turf, where they are most comfortable, their stories and what they might suggest we could do to make this legislation better. I look forward to participating actively in that exercise.

I have a lot of material that I need to share with folks, and I'll be asking the legislative research folks to help me with that, so we can all be as informed as we possibly can. I urge you to read some of it, because it is really telling and informative, and it will be important at the end of the day if we are going to do the right thing here and make sure that 30 years down the road we are not coming back and looking at putting in place some of the things you are going to hear from Susan Kezios this morning, which are already in place in many US jurisdictions. Thank you very much.

This document is a verbatim copy of this witness’ oral testimony. To review the original transcript:

Copyright (c) 2000
Office of the Legislative Assembly of Ontario
Toronto, Ontario, Canada

Risks: David and Goliath story, Veil of secrecy, Susan Kezios, Banks, Strategic lawsuit against public participation, SLAPP, Ontario Public Hearings, Canada, 2000, Retaliation, 5,000 new lawsuits per year in Ontario, Canada, Threats of lawsuits, Fear, distrust, hate and contempt, Gag order (confidentiality agreement), Justice only for the rich, Political champions, Tony Martin, Grange Report, Canadian Alliance of Franchise Operators, CAFO, Media is sued, American Franchisee Association, AFA, Les Stewart, Canada, 20000306 Tony Martin

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