Vic Fremlin Public Hearing Testimony

I also have a franchise…I know what these guys are up against…I feel for those people…Most of these guys that run these franchises won't come and sit up here because they're scared for their jobs, they're scared for their houses, they're scared of all this stuff. I don't care, I'll say it. That's what happens.

LegislativeAssemblyofOntarioCostofArms.jpg

Legislative Assembly of Ontario
March 7, 2000

Public Hearing Testimony
Sault Ste. Marie, Ontario, Canada
Mr. Vic Fremlin, Lock City Dairies

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

FRANCHISE DISCLOSURE ACT, 1999
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

LOCK CITY DAIRIES

The Acting Chair (Mr Ted Chudleigh): Next is Lock City Dairies, Mr Vic Fremlin. Welcome to the committee, sir. We have 20 minutes together.

Mr Vic Fremlin: I'd like to thank everybody for letting me speak today. I'm here to represent Lock City Dairies. I'm going to talk a little about our company. We are a grassroots company. We produce the raw product from our farms. We started as a third-generation dairy farmer in 1991, when the company that was selling our milk here in town left. We decided we'd try to build ourselves a dairy. We never did that before, so it was quite an attempt. We started from nothing and worked our way up the ladder.

I have no problem starting businesses. This is the third business I've started, but with this one, trying to access chain stores becomes a nightmare. You can get right in the community, be part of the community and spend your money in the community, but that doesn't necessarily mean you're going to get your product on the shelf. What happens is you have a store owner, a franchisee. If he wants to buy the product he's not authorized; he doesn't buy the product. From that standpoint, you have a lot of problems with being able to create more jobs, build, go on and on from there, and make your whole picture turn out right, because at the time, when it goes to go in there, you think you're going to end up going in there—like, say, the Loeb stores. They got bought out by another franchise. I'd say I was in there at 70% shelf space. It ends up it goes back to, say, 10% shelf space. There are a lot of problem with the franchises and the franchisor when they have a lot of customer demand for that product.

In our area in Sault Ste Marie - I don't know if you people know about the Soo - it ends up that there's a lot of unemployment here. We need jobs here, and building local businesses in this area helps us quite a bit.

Basically, my biggest complaint is you never know from one day to the next whether you're in or out. It's kind of a situation of whoever makes the best deal down there, and it's not the small guy. The small guy never gets into the picture at all. You can phone down and try to get a meeting going with them, and the first thing that will happen is, "Well, the contract's already signed," and maybe "Good luck next time." So you wait, say, a year and a half and you phone again, "Well, you phoned too early."

"OK. When should I phone?" "Well, you've got to phone in another six months." You phone in six months and they'll tell you, "Well, you're too late." Then you say, "OK, I'll get you next time." You phone next time, say in another two years when the contract comes up, and they'll say, "That guy you were dealing with is no longer here." They change the guys.

You'll say: "OK, I better change my tactic. I'll come down there." So you end up going down there and when you're down there they don't see you. You think: "That's no good, so I'll try something different. I'll try and arrange for somebody else to make an appointment with you." That doesn't work.

Then all of a sudden, say, the company is sold out to another company, "That contract's no longer valid so you're not eligible to get in there." And then when you do get in there and you're doing very well, all of a sudden that company sells out and another guy takes it over. Then another big corporation comes along and they sign another contract, and you're out of there again.

It's an ongoing problem here. If you want to talk about investing in northern Ontario, this business is a very tough business and we can compete at it. We've proven that. We started with not one bag of milk and now we're close to half the volume. That didn't come easily. It came by local support. In these franchise agreements, the store owners, or supposedly store franchisors, whatever they are, cannot make a decision. They want to make a decision, but they can't make it. The consumer wants to have a choice. In Sault Ste Marie, say it's 30-some years we've been able to buy one product in an A&P store up here. Thirty years is a long time to eat corn flakes, if you think about it. If you ate corn flakes for 30 years, you'd like to have choice, you know?

The book that I brought out today breaks it down in detail. A store that I dealt with, one store individually - I detailed it all so you can see exactly what you've got to go through to penetrate these stores.

There are letters down and there are reply letters. Some of the replies are quite amusing. It ends up that my product is still not on that shelf. It was in there twice and it was taken out twice. The first time it was taken out because of a breach of contract after three months. The second time it was brought in and was taken back out, but it's supposed to go back in again.

That type of thing goes on in these franchise agreements. It hurts a local business like Lock City Dairies, and it goes down the ladder. It hurts not only my business but anybody who's dealing with me locally. I feel that I've provided enough information. If you go through all that I've given you, there's nine years worth of public involvement, support from the community, recognition for winning awards for business in northern Ontario. I find that these agreements with the franchisees and the franchisor are only one-sided. They've got to look more into fairness and respect.

I also have a franchise. It's a John Deere dealership, a Kubota dealership. I know what these guys are up against. I'm in support of making Bill 35 add in there so we can have a fair ballgame for the guys who are out there trying to make a living, for the community. I feel for those people.

The Acting Chair: That leaves us about three minutes per caucus for questions. We'll start with the Liberal caucus.

Questions

Mr Brown: Obviously it is a problem. We heard from Farquhar's this morning. We've known about this issue in terms of sourcing and providing consumer choice to the residents not just of Sault Ste Marie but all of Algoma and all of northern Ontario. I think in some ways this is a more particular issue to northern Ontario because of the distances between the major communities.

What you're telling me is that the franchisee, ie, the store operator, doesn't have the opportunity to buy your product even though your price quite often is at least competitive and probably lower.

Mr Fremlin: It's competitive.

Mr Brown: That's likely because, at the senior levels of the corporation, they have made deals with the major dairy companies for shelf space and other considerations that go beyond just the actual delivery price to the door.

Mr Fremlin: These decisions are all made in Toronto. The guys who make the decisions aren't in our community. They don't know the demand for their product. Put it this way: I really don't care who puts their dairy products on the shelf as long as I can have mine on there for my company to be able to have a choice. Just make it fair, that's all. I don't want 90% or 80%. If I had a store offering me 90%, I'd say that 50% is fine.

Mr Brown: You just want the ability to compete on an even footing with the other corporations, and that doesn't happen because corporate headquarters deals are cut that you are frozen out of?

Mr Fremlin: Yes. If I do get on the shelf, it's in the corner at the bottom. I wouldn't do that to anybody. It's not fair.

Mr Martin: Thanks for coming today, Mr Fremlin. This is an issue that should concern all of us because it's about how we do business in northern Ontario. Your situation is an excellent example of how decisions that are made other places, how relationships that are sort of above and beyond us and out of our control, affect directly our ability to have a healthy economy going. There was a suggestion made this morning that local farmers and producers could put their product into the non-franchise stores. I know you've been doing that. You got your product into some of the gas stations locally, and it wasn't long after that that the franchisee discovered that people would actually buy milk at a gas station because you opened it up for people, and before you know it a deal is cut at the top level and you're out of there too. If this keeps up, there won't be very any venues left for you to go into. If we don't do something by way of this bill to give you some relief, how long can you hang in?

Mr Fremlin: Well, I like to fight a little bit too. This type of stuff gets on your nerves after a while. I think this committee that's sitting here today—I couldn't believe that I made it this far to talk about it. It needs to be addressed or eventually the big guy will always win. He'll do something. If he gets away with this, he'll win, but it depends on the committee here, what you're going to do. They'll always win, the big guy. He'll just keep at it until he's worn you out or he's done something. We're talking about gas stations; I put my milk in the gas station and everybody thought it was a big joke. All of a sudden the other company comes along and they took it out of the gas stations and put their milk in. Holy Jeez, I develop a market and then they figure it out so they go and get it in the gas station, and all of a sudden a guy from Toronto tells the gas station owner, "Put in such-and-such a product." "I want to keep the local product in here." "Oh no, you can't do that. You're out of a job." Basically that's what he's saying. Most of these guys that run these franchises won't come and sit up here because they're scared for their jobs, they're scared for their houses, they're scared of all this stuff. I don't care, I'll say it. That's what happens.

Mr Martin: Can you briefly give us the My-T-Fresh Eggs story?

Mr Fremlin: My-T-Fresh Eggs was in this area for, say, a total of 30 to 35 years. They were the only egg supplier here and up until the last five years he and I used to travel to a few stores and state our case because I had milk and he had eggs. Matter of fact, he trucked milk for me for a while. All of a sudden he ended up selling his business. I couldn't believe it. He was telling me the problems he was having: He had 90% of the shelf space and then he had 50% of the shelf space and then he was down to 25% of the shelf space, and at the time he was at 25% he was telling me he had to truck his eggs in a 300-mile radius because he had to get rid of them. He said, "It's costing me too much," and finally it came down right to the end, he had only 25% of the total take of the shelf. He ended up selling out to a larger company and taking the hens and all the cages out. He's out of business. Now you've only got one choice of eggs in Sault Ste Marie and everybody knows what that is.

Mr O'Toole: Thank you very much, Mr Fremlin. I first want to extend my congratulations, along with the Premier and Minister Hodgson, for being the 1998 entrepreneur of the year. Looking at the CV here, you've really done a remarkable job of marketing. Mine is really more of a comment and I'll share my time with Mr Gilchrist. I mean it quite sincerely that you're quite entrepreneurial; that's evident. You're in competition with Farquhar, I guess?

Mr Fremlin: No.

Mr O'Toole: Not to be smart, are you in the same kind of deal?

Mr Fremlin: I produce the raw product, OK? It is controlled by the Ontario Milk Marketing Board, but I have my milk picked up by the trucks that I own, along with other farmers, and we truck it down to Farquhar's and they process it. But at the present time I have built a dairy in Sault Ste Marie minus my processing equipment. The main reason for that is, if you look, you'll see the building going up there—

Mr O'Toole: Yes, I see that here.

Mr Fremlin: - but I do not have the processing equipment. I have everything but -

Mr O'Toole: But you're going there.

Mr Fremlin: - what happened was when these chain stores flipped around, I ended up going from 90% shelf space down to 10% shelf space, and in some cases none. At that time that hurt my project, so now I've had to go and fight for my market back. It ends up that I'm only short like my processing equipment. I've already spent millions of dollars. You're talking maybe $300,000 to $400,000, depending on how I do it.

Mr Gilchrist: I do applaud you for the thoroughness with which you're applying yourself to this project. The one thing missing from this brochure - I certainly agree with the destinations you've suggested people should be addressing their concerns to, except there's nothing on there listing the head offices of the various food companies. If I might offer a suggestion, one of the most powerful things you could have done is if all of these letters had in fact been received not just by the local manager - who hopefully forwarded those, but I don't think we should make that assumption, to the head offices of Loblaws and A&P down in Toronto. At the end of the day I've got to believe if they thought it was compromising their ability to sell more product in Sault Ste Marie they would have to seriously consider this. If they're bound in a certain contract, that's fine; maybe at the end of that contract things will change. But in the meantime, they were creative enough to get themselves into their current situation; presumably they could be creative enough to find a way around their Beatrice or Parmalat contracts. I strongly encourage you to make sure that the people who hear your message loudest are those who stand to lose the dollars from the customers who move elsewhere. But otherwise I congratulate you on what you're doing.

Mr Fremlin: Thank you. The book has some letters sent to head offices. That brochure you have there is old and I've created something else. There have been a lot of letters sent. One thing is, you'll never get a reply to what's going on.

Mr Gilchrist: Buy five shares and go to the shareholder meeting.

Mr Fremlin: Yes?

Mr Gilchrist: Seriously. Go to the shareholder meeting, stand up as a shareholder and ask why the sales in their stores in Sault Ste Marie are suffering because they have made a decision that may very well be profiting a buyer—I mean, we haven't mentioned around this table in the first two days that one of the other things suppliers do is golf trips for the purchasing buyers to exotic locations at this time of year, all sorts of incentives to do business with them. If that is truly prejudicing their ability to sell more product in Sault Ste Marie, I think the other shareholders deserve to hear that.

The Acting Chair: Thank you very much, Mr Fremlin, for coming and presenting to the committee. We appreciate it very much.

This document is a verbatim copy of this witness’ oral testimony. To review the original transcript: http://www.ontla.on.ca/web/committee-proceedings/committee_transcripts_details.do?locale=en&Date=2000-03-07&ParlCommID=1&BillID=&Business=Bill+33%2C+Franchise+Disclosure+Act%2C+1999&DocumentID=19726#P409_148945

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


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