Franchisees say Chemwise taking them to the cleaners

Besides, the Canadian Franchise Association, of CFA, had given Ajax-based Chemwise its stamp of approval by accepting the company as a member. Hope says it gave her comfort. She has none of that now. Just grief and a lost dream.

The Toronto Star
March 15, 2000

Franchisees say Chemwise taking them to the cleaners
Man behind the scenes spent time in jail for $27 million Argosy Financial Corp. fraud
Tony van Alphen

Brenda Hope thought she was buying her financial future.

It was a franchise to sell cleaning and maintenance products to commercial an industrial companies.

She left a good job as a legal secretary to start building a franchise with Chemwise Inc.

It looked like a solid enterprise with strong potential.

Besides, the Canadian Franchise Association, of CFA, had given Ajax-based Chemwise its stamp of approval by accepting the company as a member. Hope says it gave her comfort.

She has none of that now. Just grief and a lost dream.

‘I would never, ever buy a franchise in Ontario again. There is no legislation to protect people.”
- BRENDA HOPE, Franchisee

Hope didn’t know that Chemwise would run into financial trouble, litigation and problems with Revenue Canada or that she would be one of several franchisees battling the company.

And she didn’t know that one of the key players in Chemwise was J. David Carnie.

In the 1970s, Carnie was the chief executive of another venture called Argosy Financial Corp. His tenure turned into what was then one of the biggest frauds in Ontario history.

It ended in 1985 when a court sentenced Carnie to 6 1/2 years in jail for swindling about $27 million from 1,000 investors in Argosy.

Hope a married mother of two who lives in Coldwater, north of Barrie, says she fears she will lose her two franchises and about $90,000 after only two years of business because of Chemwise’s moves to undermine her.

Cleaning franchisees face financial ruin
“It’s really unbelievable what they’re doing to me,” Hope said in an interview yesterday. “I would never, ever buy a franchise in Ontario again.”

“There us no legislation to protect people. There needs to be mandatory disclosure so people know about material things before they invest.”

Richard Cunningham, president of the Canadian Franchise Association, which approved Chemwise as a member company, said his organization didn’t know about Carnie or his background until a Star reporter pointed it out.

Government records show Stephen Swalm is Chemwise’s president, corporate secretary and sole director.

In promotional material for prospective franchisees, Carnie’s signature appears with his position as executive vice-president. He is in charge of selling franchises.

Swalm’s name and post are below Carnie’s name. He is also Carnie’s son-in-law.

Sources close to Chemwise say the company is struggling. Chemwise, whose symbol is an owl, started in 1995, and has about a dozen franchisees, but it has had significant turnover.

In a brief interview, Carnie revealed that Chemwise had changed its name to Niche Chemical Solutions Inc. during the past month, but he would not discuss why the company made the switch or any internal problems with franchisees.

“Frankly that’s none of your business,” he said before hanging up the phone.

Hope alleges Chemwise and Carnie are close to squeezing her out of business by enforcing a provision in their franchise agreement for about $4,000 in payments covering inventory costs.

At the same time, Hope charges company officials are telling customers to conduct business with Chemwise or Niche directly because she is no longer representing the firm.

Other franchisees make similar complaints.

But Carnie said some franchisees have “terminated” their distribution businesses. He would not elaborate

Chemwise owes $100,000 in taxes, documents show
Although details about the company’s financial health are sketchy, Canada Customs and Revenue Agency (CCRA), formerly Revenue Canada, provides some insight into the firm’s troubles.

According to CCRA documents, Chemwise owes more than $100,000 in unpaid taxes. In addition, CCRA has instructed Hope to send any cheques to the government and not Chemwise.

Furthermore, former franchisee Brian Shaw of London won a judgment and garnishee order in the Ontario Superior Court of Justice last month against Chemwise and its distributors for payment of $48,000 plus interest and court costs.

Shaw said he took Chemwise to court when the company did not repay him for selling his franchise back to the company.

Franchisees say Carnie admitted his criminal conviction to them at a meeting in 1998. However, they said Carnie played down his role in the Argosy swindle and claimed the government wanted to make “an example” of him.

Carnie also told the meeting that he had found God in jail, according to one franchisee. He continues to open franchisee meetings with prayers.

Meanwhile, the franchise association’s Cunningham said his group requires franchisors to disclose the background of its principals to the CFA and franchisees. The franchisor should also reveal the backgrounds of any senior managers, he said.

However, Cunningham said a question remains about how much the association should know about middle and lower level managers when the principals are ultimately responsible.

“If they have confidence in those people despite something that appears in their background, then should we know?” he wondered.

Cunningham said if Carnie held a senior position and the association knew about his background, it may have rejected the company’s membership.

The CFA did not recognize Carnie’s name when it appeared beside the company on the association’s membership list and Web site.

Chemwise did not renew its membership last fall, but the company and Carnie’s name still appeared on the association’s list until the CFA removed it this week.

“That was a mistake and it has been corrected,” Cunningham said.

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