Diane Meeuse Public Hearing Testimony

Another one says that she and all her descendants give up any right to seek redress against them. How could you ask somebody to sign something like that? Ms Meeuse: I wouldn't sign that. Mr Tony Martin: It's unbelievable. It's legalized extortion. Ms Meeuse: It is.

LegislativeAssemblyofOntarioCostofArms.jpg

Legislative Assembly of Ontario
March 9, 2000

Public Hearing Testimony
London, Ontario, Canada
Ms. Diane Meeuse, franchisee

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

DIANE MEEUSE

The Vice-Chair (Mr Garfield Dunlop): I'd like Diane Meeuse to come forward. How are you this morning?

Ms Diane Meeuse: Fine, thank you.

The Vice-Chair: You have around 20 minutes, Ms Meeuse. We can ask some questions in that period of time.

Ms Meeuse: First of all, I'd like to thank you all for giving me the opportunity to provide you with this letter which outlines my concerns regarding your investigation into formulating badly needed franchise legislation. Would you like a minute to read this outline? Like it says, I had a franchise for 10 years, and when the lease expired, all I got was a handshake, and that was it, even though they gave me a bad location and they admitted it. They said, "We're all in this together, so thank you very much."

I think we should have something to protect us. I was sort of a beggar for punishment. I didn't just buy one; I bought three. I only listed one here, but I bought two more, because at the beginning it looked like it was a good deal and sales were creeping up. I thought: "I'll give it five years. It should come up." Then they said they were bad locations. The one I mention here had a 10-year lease; the other ones had six. One was in Ottawa, and the other one was here in London.

Mr Crozier: Just one second. Chair, is there something written from the deputant? We don't have a copy.

Ms Meeuse: Sorry, I gave out at least 25 or 30 copies.

The Vice-Chair: Has everyone got a copy now? OK. Go ahead, Ms Meeuse.

Ms Meeuse: I also bought my franchise in 1989. It seems like it was a popular year for franchising. I asked them verbally when it expired. I knew it had a 10-year expiration date. They said: "Don't worry. Even if you die, it's going to go to your kids. You can't lose with us. You're a family member."

For the first couple of years, they seemed like normal, nice people to do business with. I was winning awards for getting the sales up and I was a wonderful person. But near the end they said: "We're not renewing the lease with this mall. It's nice knowing you. You are getting a little bit older; maybe you should retire. You have grandkids." I said: "I'm not ready to retire. Isn't there any way you guys can help me? Give me another location or something?" They said: "No, you need another-now the fee is not $210,000, it's $300,000. If you have this, maybe, but maybe you should look after the grandkids. Thank you very much." That was it. I lost a lot of money.

The Vice-Chair: Three stores, did you say?

Ms Meeuse: I had one here in London that had a 10-year lease. Then I bought another one that had a six-year lease. A total of three, yes. One in Ottawa.

The Vice-Chair: In Ottawa, London and where?

Ms Meeuse: One in Ottawa and two in London. So you're looking at a big investment and nothing to show for it at the end of 10 years of hard work. They said one was a bad location. The second one, they said: "The mall is being emptied now. A lot of stores are pulling out." Actually, it's the one across here, the Galleria. I had my daughter running the one in Ottawa because she lives in Ottawa. She said, "Aren't you going to renew?" They said, "You might have another baby and you won't have enough time to look after the store, so perhaps you should just stay home with your baby," basically. So we lost that investment too. They bought her store for just the equipment, used equipment. What is it worth? Practically nothing. They sold it to another franchisee who was new, because they could bully him and tell him what to do and he would do whatever. They like that. They like new people.

In the location I had, the rent was 40% of sales. In any business you can't make money if the rent is that high. I said to them, "Perhaps you should talk to the landlord and get the rent reduced." They said, "Oh, we can't do that." But that's OK. I understand that. Business is business. You sign up for a certain amount of rent, and the landlord expects that. When a mall is being vacated and there are a lot of empty stores, a lot of times the landlord will reduce the rent for you. But they weren't one bit interested, because I was paying the rent and they weren't. They only do things to help themselves, but when it comes to helping the franchisees, they're not too generous.

I don't know; I don't really have a solution for the way they treat franchisees, but I'm not the only one who was treated like that by this company. More than 50% of the franchisees are not happy. But no one wants to say anything, because the minute you voice your opinion, you're treated awful, and they don't want that. I told them that since I'm out, I'm going to come out and say the way we are treated.

The Vice-Chair: We appreciate that. We probably have some questions here for you. Is that OK?

Ms Meeuse: Sure.

Mr O'Toole: Again, Ms Meeuse, I appreciate the story, the real dilemma of the individual franchisee. It's important to make sure there is a framework of fairness. That's ultimately what you're aiming for. Would you say, though, that you were-and I'm not trying to say that you weren't-adequately prepared or advised to make that investment decision, or were you anxious to get into the business?

Ms Meeuse: No, I wasn't really anxious to get into it. But they promised me a pretty good return on my investment and they said: "We'll help you in any way. You don't have to worry about it. All our stores make money." After I was in it, I talked to a lot of franchisees when we were at meetings and found out that hardly anyone made money.

Mr O'Toole: That wouldn't be fair dealing, perhaps.

Ms Meeuse: No.

Mr O'Toole: Did you actually have the $210,000, or did you have to borrow it?

Ms Meeuse: I had the $210,000, but I borrowed the rest from my father-in-law.

Mr O'Toole: I'm not sure if you're familiar with the three provisions that currently exist in this proposed legislation. One is disclosure, which says, "This is the business plan; these are the rules." Then there's the whole issue of fair dealing, which I suspect some judge would say means what it says, for both parties. Then there's the right to associate. In that, you could check the Web site-electronic disclosure-and you could do a lot of individual and collective research in asking other people, "How are you making out?"

Ms Meeuse: Yes. I asked them.

Mr O'Toole: What did they say?

Ms Meeuse: Before I got I into the system, they were so afraid to say anything against the system that they all said, "We're doing just fine." But now that I think about it, they didn't actually say: "Yes, we're making money. We're very happy." They just said, "We're doing good."

Mr O'Toole: "Come join us."

Ms Meeuse: "We have fun with the customers." They just changed it.

Mr O'Toole: They changed the subject.

Ms Meeuse: Yes.

Mr O'Toole: Thank you for putting a real face on this.

Mr Crozier: Did you actually have a franchise agreement that was signed?

Ms Meeuse: Yes.

Mr Crozier: So when Second Cup came along and suggested that your daughter go home and raise children and that they would cease the franchise, did you have advice that they were able to do this so flippantly, to simply tell you to go home?

Ms Meeuse: I didn't think they could do that. But when we asked the lawyer about suing them, he said: "You don't want to go up against a big company like that. They have a lot of money to fight it. "We lost a lot of money. We don't have a lot of money to back us up right now.

Mr Crozier: But your advice was that what wasn't in the agreement would allow this company to simply get away with that?

Ms Meeuse: It does say that they don't really have to renew after the time is up.

Mr Crozier: OK, so it was at renewal time that this issue came up.

Ms Meeuse: Yes. But verbally they don't say that. They say that even if you die, your family gets it. They tell you that verbally: "Your money is as sound as anything with us. Just come on board and you'll make money." They give you financial projections that show how much money you are going to make. Even in the worst-case scenario it makes money.

Mr Crozier: You spoke about the location, that their reason was the location was no good. Who chose the location at the outset?

Ms Meeuse: They do.

Mr Crozier: They do. So they come along after they have chosen a location and tell you that your location isn't any good, so for that reason they are simply going to take the franchise away and don't offer you an alternative.

Ms Meeuse: Yes.

Mr Crozier: That's unfortunate. This is one of those times when we are all trying to work towards a solution to prevent the kind of experience you have had from happening to others. Are you totally out of the business with Second Cup?

Ms Meeuse: Yes.

Mrs Boyer: Thank you. Just a comment. You talk about input, that you hope the input you bring to us will guide us in drafting good legislation. My colleague Mr O'Toole talked about disclosure, fair dealing and the right to associate. Do you have anything else that you would like to bring as a recommendation to this bill, or do the three main points in the legislation satisfy you and we can work on them?

Ms Meeuse: Basically, they want the franchisee to take the responsibility. But since they claim we are in this together, like a family, shouldn't they have some of the responsibility? They chose the wrong location and they got my money, so aren't we in this together? Shouldn't they give me another location?

Mr Tony Martin: Thank you very much. I recognize the nervousness-

Ms Meeuse: No, I'm not nervous.

Mr Tony Martin: I could understand it completely if you were.

Ms Meeuse: I got over it.

Mr Tony Martin: Good.

The Vice-Chair: You can really open up now.

Mr Tony Martin: Your story presents to me like a case of legalized extortion.

Ms Meeuse: Yes.

Mr Tony Martin: They see you with $210,000 and they want to get it out of you, so they will tell you anything you want to hear. Then as soon as you sign the agreement and get into the business, it's game over, end of story. Were you here for the presenter before?

Ms Meeuse: No.

Mr Tony Martin: She ended up in a bad situation too. She thought she was part of the family. As a matter of fact, she probably thought she was one of the favoured ones. You probably did too.

Ms Meeuse: So did I. I won a lot of awards.

Mr Tony Martin: Yes. You were the favoured one. Then when they decide that they've got as much out of you as they possibly can and they perhaps see another victim, they sort of leave you aside and then they send you a document.

Just let me read you a couple of the clauses in Ms Rickett's statement from the firm. Clause 1 says that she agrees never to take them to court. That is giving up fundamental rights. Can you imagine receiving a document from somebody that says, "I agree never to take you to court"?

Another one says that she and all her descendants give up any right to seek redress against them. How could you ask somebody to sign something like that?

Ms Meeuse: I wouldn't sign that.

Mr Tony Martin: It's unbelievable. It's legalized extortion.

Ms Meeuse: It is.

Mr Tony Martin: And we have here a bill that in my view simply puts a false face on a system that will be no more regulated after we put it in place than it was before. I think that would be doing the industry more of a disservice than just not doing anything. We are suggesting, by way of legislation that I have introduced, Bill 35, that among a lot of other things there should be some dispute resolution mechanism, someplace you could go and present your case, and the franchisor would have to come and present their case, and some third party arbitrator with no vested interest would deem who was right and who was wrong; if they want you out, at least recognize some of the investment that you made and the contribution that you made.

Ms Meeuse: If I were a bad franchisee, why would they sell me three stores? They weren't all sold at once. The second one was four years later, and the other one was five years later. Why would you give three stores to this lousy franchisee? It doesn't make sense.

Mr Tony Martin: I have a document here that I shared with a gentleman earlier that talks about some of the agreements that people sign. It says here:

"Franchisees should not assume that what is said by the franchisor during negotiations"-during the courting period for a franchisee-"will be reflected in the franchise agreement. Almost all franchise agreements include an integration and/or no representations clause. These clauses, ie, the 'I didn't say that' and the 'this is it' clause, appear to be routine but actually relieve the franchisor of any obligation to fulfil agreements made during the negotiations or to even acknowledge that any agreements were made other than those written in the franchise agreement."

This is the industry that we're looking at today. This is the industry that you were caught up in. We read the advertisements to come on and invest your money and this is turn-key and no problem, you don't have to have any experience, we'll teach you and all that kind of thing. At the end of the day, what we end up with, for the most part, are more and more people like yourself who have been victimized.

Ms Meeuse: Yes.

Mr Tony Martin: So thanks for coming today.

Ms Meeuse: There's one more thing I'd like to say. After I bought the second location, later on the mall was kind of getting empty and they said, "We don't think we'll renew this lease with you, because the mall is not very busy, so we don't think it's a good location." But they went and signed with the mall for another four years after I left. One day I said to the leasing gentleman: "Why did you do that? You know it's a bad location. You wouldn't let me run it." He said: "You're from London and you know London. We're going to get somebody out of town to lease that. They won't know any different."

Mr Tony Martin: I rest my case.

Ms Meeuse: I thought, "My gosh, this is worse than extortion, what you're talking about."

The Vice-Chair: Diane, we really appreciate your time this morning and thanks for being so honest and up front with us.

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=2000-03-09&ParlCommID=1&BillID=&Business=Bill+33%2C+Franchise+Disclosure+Act%2C+1999&DocumentID=19723#P197_61545

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


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