Steve Gilchrist, MPP, Second Reading Debates

Thirty years ago, when you got a Canadian Tire dealership, it was literally a handshake and about a one-page franchise agreement. Now it's a thick legal tome that would take you hours to read through and digest. But along the way the Canadian Tire Dealers' Association has guaranteed that there has been a balance. They have access to the inner workings of Canadian Tire; the dealers have representation on all the appropriate boards, whether it's marketing or advertising.

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The Legislative Assembly of Ontario
May 17, 2000

Member of Provincial Parliament Statement
Toronto, Ontario, Canada
Mr. Steve Gilchrist, MPP

Hansard Reporting and Interpretation Services
1st session, 37th Parliament

Orders of the Day
Second Reading Debate

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

STEVE GILCHRIST, MPP

Mr Steve Gilchrist (Scarborough East): I'm pleased to rise to join in the debate today on the bill. In fact, I'm particularly pleased because my background, before being elected, was in the franchising business, of course.

Mr Bradley: Canadian Tire, my favourite.

Mr Gilchrist: That was with Canadian Tire. I wouldn't have brought it up if not prompted by our colleague opposite from St Catharines.

The perspective I bring therefore is as someone who was very fortunate to have been part of a franchise system that took great pains to make sure they had full disclosure; took great pains to make sure that before anyone was selected to be a dealer they went through an extraordinarily rigorous training program, not just including various competency tests but active, hands-on training in large, medium and small Canadian Tire stores. There was not only a guarantee therefore that the prospective dealer had a complete awareness of the Canadian Tire system, but Canadian Tire had a very thorough awareness of the prospective dealer. It was only after a six-month training regime that Canadian Tire made its final decision. Along the way you had very detailed access to all of the pricing issues, all of the staffing issues, the relationship with the head office.

I guess what I took from the hearings we held earlier this year was the very stark contrast to many other companies. We heard particularly from representatives from the grocery industry that they had heard something very different in their training; that they had not had full access to information, they had not had the sort of detailed knowledge of the relationship and all of the ramifications, all of the pitfalls that might come forward in the course of the relationship between the franchisee and the franchisor.

Mr Speaker, you of all people know that the roots of this bill go back almost 30 years, to the Grange report of 1971 commissioned by Mr Arthur Wishart, after whom we have named this bill.

All across Canada franchising accounts for $90 billion in sales and Ontario is responsible for an extraordinary 60% of that, $54 billion; 40% of all the retail dollars generated in this province are generated within a franchise system.

Unfortunately, existing legislation does not cover the franchise relationship. It really is quite extraordinary that we have taken this long to codify into law the sorts of standards, the expectations that all members in this House, and quite frankly all people in this province, would have reason to expect in a contractual relationship between an franchisee and a franchisor.

Alberta set the trend; so far they are the only province that has passed franchise legislation. I think it's quite appropriate that we're taking a lead. Hopefully the other provinces will take heed of what Alberta and now we are proposing to do, and will expand the coverage to protect their franchisees and franchisors equally.

We had a number of representations, not just from individual franchisees and franchisors, you will remember, Mr Speaker, but also from the Canadian Franchise Association. They admit member franchisors on the basis of rules very comparable to what we're proposing in Bill 33: rules that would force disclosure; rules that would provide for penalties if disclosures were inappropriate or inaccurate; and fair dealing. I'd like to think we've gone even beyond what the CFA has stated as their expectations of members in terms of our standing up for those three principles.

The legislation is also based on the work of the Franchise Sector Working Team, representing franchisees and franchisors from all across Ontario. We've heard from the member from Sault Ste Marie, before he moved over to take a different job in the chair today, that he has had a personal interest in this. How appropriate, given that Mr Wishart represented the same riding 30 years ago. I think this is an issue that crosses partisan boundaries. Quite frankly, we've taken great pains to make sure that this bill deals only with the framework around disclosure, the framework around fair dealing. It isn't appropriate for this Legislature to interfere in the actual contractual arrangements between a franchisor and a franchisee as long as there is full disclosure up front. If in fact there are penalty clauses, if in fact there are hazards if you transgress certain rules, then I think the franchisee has to be accountable for those indiscretions. On the other hand, if the franchisor does not provide that notice up front, that's a whole different ball game.

I know the member from Durham will be following up on my comments with other observations, but I just wanted to touch very briefly on the three core components of this bill.

First off, the disclosure issues: Franchisors will be required to meet a very high standard of disclosure. They're going to be required to disclose information on their backgrounds, including any litigation history and business background. They're going to be forced to disclose information in the franchise offer, including any terms of possible renewals or termination. In addition, they're going to be required to disclose all material facts; that is, any information about the business whatsoever that a franchisee would reasonably be expected to take into account before making their sometimes very significant investment.

Penalties: If a franchisor does not provide full disclosure, I think it's quite an extraordinary penalty that we've provided for in this bill: the right to rescission; an expectation that the franchisor will have to buy back the equipment, buy back the inventory and buy back the supplies if they have not dealt honourably, honestly and completely candidly with the franchisee. That is about as onerous a penalty as you could ever expect. And that's over and above any civil penalties that the franchisee would still be able to apply for through the courts.

At the heart of it, though, is the issue of fair dealing. How will that help franchisees? Quite simply, the government has been called on to ensure that we have a bill that guarantees there's an incentive for reasonable actions on both parties. Such a provision exists in the Alberta legislation, and we're making sure that guarantee is in our bill as well.

I think we were very heartened that while there were certainly those who took exception to some of the fairly minor details in the bill, we had very strong support. I think in fact the quote from Mr Cunningham, who is the president of the Canadian Franchise Association, speaks perhaps most eloquently:

"The CFA advocates Bill 33 for its commendable balancing of regulation without red tape. We feel the government goes just far enough towards allowing the franchisees access to the information they need to steer clear of unscrupulous sellers. As well, the bill is consistent with the high standards our association endorses in promoting fair dealing. The bill's protection of a franchisee's freedom to associate with organizations without interference from the franchisor has always been our position. Further, the time delays and higher costs incurred by excessive regulation are not problems encountered in the proposed legislation."

Before concluding, I'd just like to expand on one thing Mr Cunningham put in that comment. We heard far too often in those hearings that one of the single biggest problems franchisees faced was the inability to associate with their peers. In many cases, the franchise agreement expressly prohibited their sharing information, even in some cases sitting down and having a coffee with their colleagues running comparable franchises elsewhere in the province. We think that's wrong. Again I think back to my Canadian Tire background, where the Canadian Tire dealers formed a very strong organization. I wouldn't suggest they were as powerful as Canadian Tire Corp, but they were certainly strong enough to withstand the inevitable pressures from the parent corporation, particularly in those lean years when margins were tightening up, to take a bigger piece of the pie.

Thirty years ago, when you got a Canadian Tire dealership, it was literally a handshake and about a one-page franchise agreement. Now it's a thick legal tome that would take you hours to read through and digest. But along the way the Canadian Tire Dealers' Association has guaranteed that there has been a balance. They have access to the inner workings of Canadian Tire; the dealers have representation on all the appropriate boards, whether it's marketing or advertising.

We'd like to see those same powers, those same rights, accrue to all franchisees across this province. It is absolutely unacceptable to us that any two or more franchisees not have the ability to come together to share their concerns, to develop a common strategy, whether it's marketing or advertising or defence of a profit margin, and be able to take that concerted position against the franchisor. The franchisor continues to hold a preponderance of the power in the relationship simply by dint of the fact that they are the supplier. We think this is an appropriate balance, responsible franchisors are already doing it, and we think most of the others will willingly embrace this concept as being in the best interests of their franchise operation.

Again, I appreciate the opportunity to have said a few words on this bill. I was struck by the common concern from members from all three parties, the fact that the hearings were extraordinarily free of partisanship. I think due credit should be given to the person sitting in the Speaker's chair right now for recognizing that while we all might have wished to see other minor additions to this bill, it is an extraordinary, important first step forward. At least it gives us a framework on which we can reflect in the months and years to come.

If there are any shortcomings, I can assure you that members on this side of the House will be equally demanding of further changes. In the meantime, though, we've given those franchisees, in particular those we heard at the committee hearings and the ones who sent us written submissions, some reason to believe in the system again, that there has been progress, that we have moved forward, and that we're giving them the protections to guarantee that they can continue to have faith in the investment they've made in their business and in this province.

This document is a verbatim copy of this MPP’s speech. To review the original transcript:
http://www.ontla.on.ca/web/house-proceedings/house_detail.do?Date=2000-05-17&Parl=37&Sess=1&locale=en

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