Tony Martin, MPP, Second Reading Debates

So you have some 50 people coming before the committee, you have a majority of those people calling for Bill 35, and if you add the people who called for Bill 33 plus enhancements, we're talking 36 people out of 50. In my view, that's quite overwhelming. If you put that together with the stories that were in the documents that we presented and the stories that I brought before this House over the last five or six years-almost every six months I had another person in the gallery whom I asked the minister about and presented to the public in that way.

LAO_Coat_of_Arms.jpg

The Legislative Assembly of Ontario
May 17, 2000

Member of Provincial Parliament Statement
Toronto, Ontario, Canada
Mr. Tony Martin, 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

TONY MARTIN, MPP

Mr Tony Martin (Sault Ste Marie): The business that we attend to here this afternoon is the culmination of a lot of work by a lot of people over a long period of time, actually some 30 years, but most particularly over the last five or six years and, in a most intense way, over the last few months in this place and around the province.

Thanks have to go to a lot of people, and I will reference them as I move through my comments here in the House this afternoon. I particularly want to give credit to the co-operative nature of the last couple of months, where this business is concerned, between all of the parties here at Queen's Park-the Tory caucus, the Liberal caucus and our own-in moving this forward under some very trying and difficult circumstances and finding some room, some common ground, some compromise so that at the end of the day we might be able to say to the 40,000 franchisees in Ontario that there is some legislation that governs their industry that they can count on if they have to go before the courts to get a grievance resolved.

Unfortunately, though, what we have today will not do all the things that some of us hoped it might do, things that were actually contained in a bill that I tabled in the House at least three times over the last five or six years that would have seen us move to actually regulating the relationship, that would have been good for those franchisees who are now doing business in this province, many of them under some duress.

The bill that we will pass here today will present some opportunity for them; however, it will not avoid the very costly court proceeding, with the money that has to be spent on legal advice and lawyers that will inevitably ensue from what we do here today. Having said that, it will be helpful and will respond to some needs that have been defined and requests by people in the industry out there, particularly the franchisees, and so we are happy to be participating in this debate and laying before the House some of the proceedings, some of the discussions, some of the thoughts and presentations that exist across Ontario today.

What we're dealing with today is the quintessential story of power and control. The world we live in today defines power and control by money: how much money you have, how much money you can make, how much money you can get other people to give you, and, in some very rare instances, how much money you can share to make sure everybody is doing well.

In an environment of that nature, it seems to me, in the short time I've been looking at this piece of work, there are other factors at play. Among those factors is fear, a fear among people who shouldn't be fearing, who should not be worried about their livelihood, their future, their investment. Having done due diligence, having in all goodwill invested their money, sometimes all of the money they own and then some, they should simply be called to work hard, to put in the effort and realize the return that should happen on that effort. However, alas, that's why we're looking at legislation today. That's why in my view legislation is required, legislation that goes far beyond what is on the table today, which we are going to be satisfied, at the end of the day, at this point in time, will take us a small distance but which is not nearly good enough to deal with the very real anxiety and fear that is out there today among the some 40,000 franchisees doing business in this province. Those 40,000 franchisees represent, just to give you an idea of the scope of this industry, some $4 billion in investment by franchisees, some $45 billion worth of retail sales, and in hires it is the employer of some 500,000 workers in the province.

It's very important that we take a serious look at and take to heart that which we might do, and make every effort to go as far as we can to put in place things that will create a level playing field, that will present to people the opportunity they felt they were getting into when they signed agreements to go into business in Ontario.

Just to highlight the aspect of fear, during the presentations we heard as we travelled the province some four or five weeks ago, the Canadian Federation of Independent Grocers, who presented to us I believe in Ottawa, said:

"Fear is generated when franchisees are forced to sign restrictive or controlling franchise agreements that limit their ability to manage their businesses as independent operators in the best interests of the consumer … ."

"Fear occurs when franchisors locate new stores in the same marketplace as the franchisee they supply. Fear of economic retaliation should franchisees associate to discuss commons areas of concern and, therefore, increase their potential bargaining power … ."

Unless you've had an inside look or you have been in relationship with somebody or you've actually been in business yourself as a franchisee, it's hard to imagine and understand that that exists today out there in the small business sector, the franchise sector of the industry that drives this province.

However, it does, and that's why we're here today. We're here today to do something that will be helpful in lessening that fear, in lessening that anxiety and giving these folks some access to vehicles that will reduce the possibility of this continuing and give people some redress.

Franchising in Ontario was studied as far back as some 30 years ago, when the Grange report was commissioned by a predecessor of mine in Sault Ste Marie, the then Minister of Consumer and Financial Affairs for the province, Arthur Wishart. In commissioning that report, he also asked that a review be done of pyramid selling and referred sales. Just to give you an idea of the flavour, the sense of what was happening in franchising even as far back as 30 years ago, you had a government looking at franchising, pyramid selling and referred sales. In describing franchising in Ontario, that report called for a review of the "evils of franchising." I have to tell you that those evils exist to this day and are more disconcerting because of the size of the industry in Ontario compared to what it was 30 years ago, and the number of people involved, the number of lives affected by this.

The Grange report recommended legislation. The report was filed with the minister of the day and, alas, nothing was done. It sat on a shelf until a most recent attempt to do something substantial when, as many of you will remember, the Pizza Pizza debacle blew up in this province. Some of you will remember that in response to that, a colleague of mine in this place back in the early 1990s brought forward a piece of legislation to deal with it. There was a lot written in the local newspapers about Pizza Pizza at that time and the very difficult circumstance the franchisees found themselves in trying to deal with the franchisor in that instance.

I share with you just some of the commentary that was written in the Toronto Star on May 2, 1993, talking about Lorne Austin, the main franchisor in that instance. They called him a "flamboyant con man with a string of bankruptcies." "Austin was one of the most prolific white-collar criminals I have prosecuted in my career." That was said by the judge who found him guilty. Kent Neal, assistant Attorney General in Florida, called him a "racketeer, a wheeler-dealer, a cocaine-crazed megalomaniac."

This is just one of the people operating franchises in this province who are taking advantage of men and women of goodwill who simply want to invest some money to secure a job and a future and a pension and perhaps even, who knows, pass that on to their children so that they might leave a legacy. But when you're dealing with the kind of person described here in the Pizza Pizza situation in the Ontario of that day, you don't have to wander too far to begin to realize just exactly what was happening and why we need the kind of legislation that Jim Wiseman called for at that time, that I've called for over a period of five or six years now, most recently in Bill 35, that would not only call for disclosure up front before an agreement is signed, and the right to associate, given that those are important things, but would call for a regulating of the relationship so that people like Mr Austin no longer have the freedom to operate in the way they have.

It's interesting, reading one of the documents out of the United States that is put out to attract franchisors into Canada, and Ontario in particular, that they describe the environment for franchising in Ontario as the Wild West: "Come on in and shoot them up. Take advantage, get what you can and don't worry about the carnage that's left behind. It's just a matter of making money as fast as you can and then ultimately getting out."

Most recently, in the mid-1990s, on the urging of Mr Wiseman, who had tabled a piece of legislation at that time, the then Minister of Consumer and Commercial Relations, Marilyn Churley, commissioned a study. I have here he results of that study, under the heading of "Franchise Sector Working Team." It was a report to the Minister of Consumer and Commercial Relations. It was finally completed and tabled with the previous Mike Harris government and the minister of the day, Mr Norm Sterling. Interestingly enough, the central recommendation in that report was that legislation be developed and put in place. So once again there was a call for legislation. There was a call for legislation in the Grange report. There was a second call for legislation in the franchise sector working team report to the minister in 1995.

Just to give you an idea of some of the pull and tug that's happening within this place and across the province as we work to achieve even some small victory in this effort, here's a part of a letter that was written by one of the participants in that working team who saw it as not in keeping with the voice that he was carrying from a significant number of franchisors across the province. As a matter of fact, the member who wrote this letter was sitting on the working team representing the non-Canadian Franchise Association franchisors in the province. Now, if you figure that the Canadian Franchise Association represents some 15% of franchisors in the province, then this fellow represents the other 85%; at least that's the math that I would do. So you have 85% of the franchisors in the province saying to the minister of the day, "Given that everybody else on the working team agreed, as did the people who put together the Grange report, that we needed legislation, regretfully I have advised Mr Art Daniels and Mrs Eleanor Friedland that I will not be able to sign off on the status report of the franchise working team." It says: "It was my understanding that on August 22, representatives of the team were to review the final document which had been circulated previous to this meeting. The earlier circulation was to provide an opportunity for all representatives to review with their constituency the content of the final report."

He goes on to say, "At no time was it contemplated that we would move directly from a report to recommending any type of legislation to government without understanding the need and the mandate of an industry self-managed organization." He goes on to say that he, "on behalf of the people that he speaks for will be pulling out of the franchise sector working team and will not be supporting the recommendations that are herein."

Even at that point, we weren't sure what kind of legislation might be imagined or put together. It was just a recommendation that legislation be considered given that it was recommended in the Grange Report, and you have the spokesperson for conceivably 85% of the franchisor piece of the industry saying, "We're not interested in legislation." It just gives you the flavour of the discussion and the debate and the difficult challenge it presented to those of us who felt very strongly that, not only was legislation needed but that legislation with teeth was needed if we were going to take control of this industry and provide the level playing field that so many of the franchisees, who came before us over the last few years, indicated was required.

I'll just leave this aside for a second because I'm going to need it in a few more minutes to highlight another point I'm going to make as I go forward.

The central recommendation to the working team was that we have legislation. However, a major player pulled out over this issue and this will become important later in my discussion or my presentation here this afternoon. And so begins to unravel a public relations exercise to put a good face on an industry rife with difficulties, because the major players, some of the bigger franchisors, could not agree that legislation was necessary. The pressure began to block or to slow down or to minimize, at the end of the day, what would be presented and what would be acceptable or accepted here in this Legislature.

It was at about this time that I was approached in my home town, the constituency I represent here in this place, Sault Ste Marie, by some of my constituents, a couple of very well respected, good
corporate citizens in Sault Ste Marie, franchisees in two very successful Loeb grocery stores who found themselves one day under the gun by the new owner of the chain, Provigo, operated out of Montreal.

They decided at head office that they no longer wanted franchise stores. They wanted corporate stores in about, I'd say, 25 to 30 different locations across a stretch of territory in northern and eastern Ontario that went all the way from Sault Ste Marie over to Ottawa. My own constituents called for an appointment, we sat down, we talked, and they shared their situation with me. They brought me to a meeting of a larger group of franchisees in the Loeb grocery industry across all of Algoma, again people who had invested their life savings, who had gone to family members to entice them into buying into this dream they had that they would be able to build something that would employ a lot of people, including some of their family members, and ultimately, at the end of the day, be able to turn that over to their children by way of a legacy.

These people I met with-I shopped in their stores-were good business people. They did good work and they contributed in a very positive and constructive and creative way to the overall life of my community. As a matter of fact, there was one gentleman in Sault Ste Marie, a Mr Cairns, who built up a store in Blind River to a point where it was very successful. He turned it over to his son and then moved to the bigger city of Sault Ste Marie and took over a store there and built it up. It was an empty Safeway store that he took over, no longer operating. He took over that location and he built it into a going concern. The parking lot was always full. I shopped there. The aisles were always busy with people. Mr Cairns could be found at any of a number of charitable events in the community of a weekend with his wagon making hamburgers and hotdogs and selling all kinds of soft drinks, the proceeds of which went to the charity of the day. As a matter of fact, you had to get your name in early in the year to actually tie down that wagon and Mr Cairns.

This was the kind of person we were dealing with in Sault Ste Marie, who came to me distraught to a point of despair almost because there was nothing he could do in front of this unilateral decision that was made to take away his livelihood, to take away that which he had invested in, that which he thought was going to be his future that he could pass on, once again, to his children.

Do you know what, Mr Speaker? It happened to his son as well. The store that he had left in Blind River that his son continued to operate, that was doing well, they decided it was going to become a corporate store as well, no questions asked. It was just a matter of that's the way it was.

A Mr Williamson, the same story, the same kind of very good corporate citizen in Sault Ste Marie. As a matter of fact, these people-and I find this really disturbing and strange in the world that we live in today. These people spent literally weeks sleeping in their stores so that Provigo wouldn't come in and change the locks when they came to work in the morning and throw them out.

I knew very clearly, because of my roots politically in the New Democratic Party, the struggle of workers with the corporate agenda. I had a feeling that small business was also more victim than winner in the economy that was evolving in Ontario and that I saw operating around me. I had no idea how pervasive and close to home and how callous it all was, absolutely no idea, until I met personally with these men and women, these families, and they told me their stories. I couldn't believe it until I saw it for myself.

I drove through the parking lot of Cairns' grocery store one night at about 2 o'clock in the morning. I saw the family inside looking out the window, getting set up for the night, and I looked in the parking lot and there was a vehicle with shaded windows sitting there, motor running. It sat there all night-

Mr John Gerretsen (Kingston and the Islands): Was Howie visiting?

Mr Martin: No, that was another time, John-intimidating these families into perhaps giving up what they had.

There was a real feeling of powerlessness, and that was when I first tabled the bill that I am still calling on the government to perhaps at some point in the not-too-distant future take hold of and make their own and make what's in it the order of the day in terms of legislation and regulation where franchising is concerned in the province of Ontario.

It wasn't long after that that one Mary Carlucci came to see me; same story. Mary Carlucci is woman who worked her way up the ranks, got a job as a checkout clerk and stocking shelves, was a dynamo, worked hard, was bright, learned the industry, was given an opportunity to become a manager and then ultimately was given the opportunity to own her own store. She took over a store that was generating some business, but certainly not the million-dollar business that she built it up to over a period of some 10 years. I have to tell you the story was very similar with her. She was notified one day-and her parent company was National Grocers, Mr Weston. I was just reading in the paper the other day that he made a historically record-high profit. I wonder how Mary Carlucci feels about that. She's out of business. She no longer has a store. She's no longer able to do the business that she loves. I talked to her a couple of months ago and said: "How are you doing? What's it feel like to be out of the grocery business?" She said: "I miss it. I miss it like it was part of me, to walk into the store-the smell, the noise, the interaction." She loved doing the grocery business. She's no longer doing that. She's doing something else and she's quite successful at it. Given the effort that she made and the work that she did to build up that store, it doesn't surprise me.

But she got a phone call to say that there was going to be a marketing meeting at the local hotel just up the road. While she was gone at the supposed marketing meeting, the executives of National Grocers moved in and changed the locks, took over the cash registers and told any family members who were there to go home, and that Mary would explain to them later what had happened. Boom, she was gone. She came to me. She got some legal advice and began a campaign that at the end of the day meant that she got a little bit more than she was initially offered by way of a buyout package, but certainly nothing reflective of the investment that she made and the return on that investment that should have been expected, nothing that reflected the effort that she made to build up that store and make it a force to be reckoned with in Sault Ste Marie-nothing even close to reflecting the goodwill by way of the hockey teams that she sponsored and the other sporting things that she was involved in, in Sault Ste Marie. Not even close, just: "Thank you very much; it was nice. We'll see you later, and don't give me a hard time or else I'll see you in court." That's Mary Carlucci.

I just want to share with you a couple of quotes that were in the newspaper around the time of the Larry Cairns and Mary Carlucci difficulties in Sault Ste Marie. It said in the Sault Star in August 1996, "Larry Cairns and Mike Williamson are among 21 franchisees who launched a $200-million lawsuit against Provigo Inc and its Loeb Inc division." Then in the Sault Star of August 4, 1996, it says, "June 28: Launch 21-franchise lawsuit … Agreement terminated as of November 2." They were gone. They were out of the picture. Then it says in the Sault Star of August 16, "The last 18 months Provigo has taken over the operation of 47 of the 111 Loeb franchise stores, replacing franchisees with corporate managers."

Across a strip of Ontario that ran all the way from Sault Ste Marie to Ottawa, some 47 families-because it's usually families who run grocery stores; they're normally family operations. Some of them have been around for a hundred years. We met some of them when we out on the road doing the hearings-a couple who came before us in the Ottawa area. They're now feeling the pinch from their particular owner at the moment, but back in 1995-96, some 47 Loeb grocery store operators, owned by Provigo, lost their stores and were replaced by corporate managers.

Mary Carlucci: On January 8, 1997, National Grocers entered Carlucci's office and changed the locks. This was in the newspaper in February 1999. Carlucci was seen as a crackerjack in the grocery business. Mary raised sales from $9 million per year to $22 million per year in the time she was in business, yet National Grocers felt it within their purview to take that away from her because she obviously wasn't doing well enough. She wasn't doing enough business for them.

That's just part of the story that's out there, that's unfolding in Ontario today. Right now, as we speak, there are a number of grocery store operators-families who have run grocery stores across this province for some 100 years now-who are great duress, under great stress as they deal with their parent companies. The grocery store business has consolidated very much over the last short number of years to the point now where I think two major entities control 80% of the activity in Ontario. We'll talk in a few minutes about that as well, because this government has committed to moving with me and the Liberal caucus to making representation to the Competition Bureau of the federal government to see if we can get some action on that front.

The bottom line in all of these stories-and the stories that I will continue to share with you as I have time here this afternoon-is that these folks lost their stores. People across this province, some 5,000 of them per year-according to the working paper that the Ministry of Consumer and Commercial Relations put out not more than a year or a year and a half ago-some 5,000 franchisees, which often represent the livelihoods of families, are before the courts every year in this province. At the end of the day, most of those actions result in those people losing their investment.

If we're to believe Kevin Ryan, the senior vice-president of franchise operations for National Grocers, he says in his letter: "The committee has acknowledged that not all franchisees are the same. For example, in our industry, we are franchising stores that employ more than 200 people, with investments that range between $5 million and $7 million when one includes the cost of land, building, equipment and inventories." They range between $5 million and $7 million including building, equipment and inventories. That's gone. That's investment these folks made on behalf of the system.

In this business, I'm told, the franchisor has all the power; the franchisee invests all the money. It's the franchisee's $5 million to $7 million that ultimately disappears in these circumstances. If you don't believe me, I suggest that you go and talk to Mr Cairns or Mr Williamson or Mary Carlucci, who is still in Sault Ste Marie. However, you may have some difficulty, because what's interesting in all of this is that when a deal is done between the franchisee and the franchisor-which ultimately happens because it's the only thing that franchisees are left with in trying to minimize the damage-usually there's a rider, a gag order, that comes with that. It says that these people can't talk to people, can't tell others about their circumstances and what happened and at the end of the day what they got.

You can go and talk to Mr Cairns or Mr Williamson and their families or Mary Carlucci. Off the record and informally, they'll probably tell you a lot of things. But publicly they can't tell you anything, which makes for some difficulty in terms of some of the disclosure legislation that's part of the Bill 33 package that we're being offered here today. However, it's still-and I say this reservedly-better than nothing at all, because we gained a few other things in this whole piece that made that true. Anyway, we'll set that aside for now.

I actually brought the Loeb people to Queen's Park. I had meetings with them. They met with members of government. They came to the gallery here. I asked questions of the minister. I asked when he was going to bring in legislation that would protect these folks. I brought Mary Carlucci down here and did the same thing, because I wanted this story to be told, and I wanted to expose the difficulties these people were facing and the injustice that was inherent in franchising in the province.

Not long after that, I brought Peter Thomas in here, another victim, another person who had, in all good will, taken the money he could scrape up, that he had worked hard to generate over a long period of time, probably went to family and others and took some money out of the bank, borrowed some money and invested it in an opportunity that he thought, if you followed all the rules and regulations, turnkey. The document he was presented by the franchisor said, "You can't miss." But, alas, he could, and Mr Thomas did. Unfortunately, today he's short his life savings and he's not well. I suggest that maybe some of that not being well might be connected to some of the anxiety and stress that came with the very difficult relationship he had with that franchisor. There has to be some moral and ethical responsibility there as well. I share with you, from the Report on Business magazine from December 1998, that in an 18-month stint, Mr Thomas lost some $170,000 in investment.

It's interesting. We're debating a piece of legislation here that is primarily about disclosure and the right to associate. It's suggested that if Mr Thomas had simply looked harder at the document that he was presented with by the franchisor, he may not have got himself into the deep water that he did. There are some who suggest here, rather callously and flippantly, that you can't legislate against stupidity. I suggest to you that that's patronizing and belittling of the very well-meaning, hard-working and intelligent people who get hoodwinked in this province today by salesmen with a dream to sell that in the end turns out to be pretty sour.

Mr Ned Levitt happens to be the CFA, Canadian Franchise Association, general counsel. He said in an article in a newspaper not so long ago, "A good salesperson can sell around a disclosure document." I believe that to be true.

Ultimately, after I had asked the minister one more time when he was going to bring legislation forward to protect the investment of people like Peter Thomas, I brought before the House Mr Les Stewart, somebody who was directed to me because word was out there now across the province that I had an interest in franchising and was working on trying to get some legislation in place and would take the time to listen and try to develop some strategy around their particular story, but build that into the bigger agenda here, which was to get what we're talking about here today, legislation in place in Ontario.

What to say about Les Stewart? Every story of a nature that is evolutionary and building on that which is common among us in terms of what we want for each other is always championed by a small number of people, and in many instances by one person. I have to tell you, it was the support, the encouragement, the candidness and the very hard work of Les Stewart, in many ways, that has us here today in this House discussing this legislation. I have nothing but thanks and good feelings regarding Mr Stewart where this is concerned, because he was a victim himself of a franchise operation that he looked at. Mr Stewart was an MBA from Western. He did the due diligence, bought the goods, thought that this looked like a good plan. He couldn't find any holes in it until he actually got down the road a little ways and began to realize that the projections that were in the document à la how much money he could expect to make weren't panning out and that he was going further and further in the hole as each year went by.

Mr Stewart, who was a Nutrilawn franchisee, lost some $130,000 in his first two years, achieved less than 25% of the projected sales revenue. Trust me, Mr Stewart is no slouch. I don't know when Mr Stewart sleeps, I have to tell you, because I know that whenever I try to get hold of him, he's working, doing something, trying to do that which is required to put bread on the table and pay the rent and live a dignified life. But even with all that work and all that effort, he achieved less than 25% of projected sales revenue and watched 17 of 24 Ontario markets change ownership in that system in four and a half years.

He went on to found the Canadian Alliance of Franchise Operators, an organization that has been helpful to me as I've worked to try and bring some understanding and some commitment to this on the part of the government and others out there who might have an interest in this whole franchising industry.

His trial record was closely watched by the franchise industry and his story was written up in the Toronto Star.

It was after Mr Stewart came to me, and we talked about his particular story and we looked at what he would need in order to get some resolution to this difficulty, that I tabled my legislation for the second time in this place. Then, to give the government of the day some credit, they finally tabled some legislation. Minister Tsubouchi at that particular time put on the table a package similar to Bill 33. In my view, it wasn't good legislation, but nevertheless for the first time in 30 years in Ontario something was on the table that we could take a look at and perhaps build on and make something out of. It was a compromise arrived at by people from the working group, primarily franchisors or franchisor-friendly lawyers. The franchisees in the group were, for the most part, successful, continuing to operate systems out there and, of course, very much aware on which side of their bread the butter was located.

Some likened the compromise that was arrived at re the predecessor to Bill 33 as bringing drunk drivers together with Mothers Against Drunk Driving to draft legislation on drinking and driving. It was legislation that called for fuller disclosure of information before a franchise agreement is signed and basically the right to associate; that was it. I'm not saying that wasn't a good move, that it isn't something that will be helpful out there, but it's not, in my view and from talking to numerous franchisees, including the people I've just told you stories about and many, many others, enough at all.

This first offering disappeared before Christmas 1998 and then ultimately died when the election of 1999 was called. At that time it was an all-or-nothing offering. We were here; it was about 11 o'clock on the night we were to rise before Christmas. All of a sudden the House leader came back to me and said: "The government's willing to consider passing the franchise legislation. Are you in agreement?" I said: "Whoa, hang on here. I've got to talk to some people." In discussing this with some folks, we decided no, there just was not enough in this for us to agree to its going forward, and so at that time it was stopped.

Now, to give the present government credit, and particularly the current minister, Mr Runciman, the same bill was introduced in the 1999 fall sitting at the same time I tabled my bill, Bill 35, for the third time in this House. However, this time the feeling was different, in my view. The minister met with me and indicated a willingness to co-operate, and soon after that, just before the House rose, again at Christmas for the winter break, it was indicated that hearings would be possible. And in discussions with the subcommittee after Christmas, in January, it was agreed that we would travel the province for a week.

Now, that may not seem like much, but when you consider the record of this government where consultation is concerned and travel by committees is concerned, this was a huge concession, a huge win. I have to give full credit to the Minister of Consumer and Commercial Relations for agreeing to that, because that gave us the wonderful opportunity to get out there and hear first-hand from franchisees.

I suspect the Canadian Franchise Association, and others who represent the franchisor side of this, suspected we wouldn't get any franchisees to come because they weren't quick off the mark to sign up to make presentations. It was only after it became obvious that we were filling the slots with franchisees and others who had an interest in this that they began to come forward, and in fact created a bit of havoc near the end because they weren't included. They were too late and didn't get on.

As a matter of fact, Mr Thomas didn't get on because there was some negotiation that went on behind the scenes that made sure there was some balance in the presenters who came before the committee at that time. Nevertheless, the fact that they were able to come and that they agreed to come-you have to understand the risk that many of these folks took in coming forward and telling their story-

Mr Rosario Marchese (Trinity-Spadina): Threatened, right?

Mr Martin: Yes, they're going public with a very difficult relationship. You can imagine having difficulty with, say, your partner or one of your kids, and all of a sudden going public with it. That's just, in some small way, to try and help people understand how difficult this might be.

However, in this instance, franchisees coming forward to put on the table some of their concerns and their grievances re the industry or the system they belong to presented some real risk to them of some retribution. We have story after story of retribution happening in many of these industries across-

Mr Marchese: They sign an agreement saying, "You can't go out and talk about this or that."

Mr Martin: Absolutely. You can't do that. You can't join an association. You can't talk about it. You can't do this, you can't do that.

I have to say that the minister's agreement to go out to hearings was a real plus and a very courageous move. It gave us the opportunity to hear from some very honest and courageous franchisees out there who played a big part in exposing, in a fuller way than ever before, the very real challenges that exist in franchising in Ontario today.

It gave us an opportunity to call on franchisees to come forward, and they did. They told their stories-an opportunity to expose the very problematic culture of franchising happening in Ontario. The press did a very good job of covering these events. We heard from experts in the field. We heard from franchisors. We heard from lawyers, and most importantly we heard from franchisees, and in that franchisee sector we heard from people who had been victims who are out there now trying to put their lives together, dealing with all kinds of debt and strain and anxiety and, in some instances, sickness. We heard from some franchisees who are at this very moment experiencing some difficulty with their franchisor who came and shared with us the nature and the tone of that. We heard from people speaking on behalf of franchisees, which I thought was very important.

In listening to the stories of franchisees, it became obvious to all of us that this is a problem that pervades, in many interesting and different ways, the culture and the society we're trying to build here in Ontario, because it lends itself to participation by some people who are quite vulnerable: laid-off workers who are given a severance package, looking for someplace to invest it; franchising, a turnkey operation, looks good, looks like it can't miss. Alas, the literature I've looked at says that going into franchising is actually more risky than going into the traditional, start-up small business operation, something I don't think a lot of people out there knew or know and that we shared in a very real way as we went around during these hearings.

New immigrants coming to this country are often attracted to franchising because they can't speak the language, they don't know the business culture and it presents an easy turnkey operation. Many of them become indentured workers. All of these people are for all intents and purposes buying themselves a job. Then we have well-established families out there running operations like grocery stores who today are finding themselves under duress. As ownership of those systems change hands and the priorities become different, these folks find themselves up against a wall and facing the possibility of losing something that, in some instances, their grandfathers built many years ago.

The spinoff to this whole piece, which could have been covered in a very effective, however perhaps short-term and incomplete way, is the issue of sourcing product or tied buying as identified in the Grange report. For example, in my community, we have a local dairy that provides a first-class product but can't get the product on to the shelves of some of the local big chain grocery stores. That limits the ability of the local franchisee to deal with a local producer in order to up their potential to make an extra few dollars of profit; it limits the local producer's opportunity to get his product out to the market so that the consumer can decide, using whatever vehicle they can, which and what they want to buy.

We had people come forward in Sault Ste Marie from North Bay, New Liskeard, the Soo, Algoma and for miles around to talk to us about the impact of this kind of tied buying, which was referenced first in the Grange report and included in the bill that I put on the table here at the place. It was killing local economy. Small producers had to go through hell and high water to ultimately and finally get their product graded and then back and on to the shelves, and by that time, according to one of the egg producers in the New Liskeard area, in many instances, it wasn't their eggs coming back, and the eggs that were coming back were rotten. So, this kind of tied buying is not good for local producers and it's not good for local economies and I don't think it's good for franchising either, because it doesn't give franchisees that extra opportunity to make a few dollars that would keep their heads above water.

So what did Bill 35 call for? Among a lot of other things, in Bill 35 we called for the Ontario Securities Commission to act as a conduit and vetting mechanism for disclosure statements, because as it stands now, the question that needs to be asked is, if we're calling for disclosure, disclosure to whom? What's going to be in that document, and who's going to make sure that what's in that document is in fact the truth? That's the problem we have now. This doesn't go the distance that I thought was necessary, which was to have a vehicle-which, as a matter of fact, a presenter in Sault Ste Marie, Gerald Nori, referenced. He made the very strong recommendation, as well, that the Ontario Securities Commission be given the extra facility to do this.

In Bill 35, we also called for a dispute resolution mechanism, which we think is essential to protecting franchisees from not only losing their money when the franchise goes sour but then having to dig deeper into their pocket or borrow more money, or go into debt in other ways, to go to court to fight some of these battles.

We also called for further definition where fair dealing is concerned, further detailing of how renewal of agreements and termination of agreements happen and penalties for breach of any of these rules. Bill 35 would have given franchisees the right to source product where they could get it as long as it was not an issue of trademark. In other words, Bill 35 would regulate the relationship, something the government refused, and continues to refuse, to do.

As we went through the hearings, it became obvious from listening to the folks who came forward that the overwhelming sentiment was that the government move to regulating the relationship, that simply regulating a requirement for disclosure and giving franchisees the right to associate was not nearly enough, particularly for those already established franchise operations who were in some disagreement over one issue or another with the franchisor and needed some relief.

Just to give you an idea of what was told to us during the hearings, of the witnesses who came forward, one out of 50 people said that no law was needed; 13 out of the 50 people who presented said that Bill 33 was enough; eight out of those 50 people said Bill 33 with some enhancement; and 28 out of 50, a majority of the people who came before the committee, said that they recommended Bill 35 be adopted by the government and become the law of the land where this is concerned. That's overwhelming, in my view.

We also presented, during the hearings, two huge documents that the Canadian Alliance of Franchise Operators and Les Stewart put together that documented the stories of some 4,600-plus families in this province over the last five to seven years that have been damaged in franchise relationships that have gone sour.

So you have some 50 people coming before the committee, you have a majority of those people calling for Bill 35, and if you add the people who called for Bill 33 plus enhancements, we're talking 36 people out of 50. In my view, that's quite overwhelming. If you put that together with the stories that were in the documents that we presented and the stories that I brought before this House over the last five or six years-almost every six months I had another person in the gallery whom I asked the minister about and presented to the public in that way. You would think that the government would be willing to move to adopting Bill 35.

However, having said that, I am thankful, because the government did move. The government made some significant and important concessions and they will be helpful to the 40,000 franchisees across this province, and for that I am grateful to the minister and to his staff and to everybody else who worked with us over the last few months to get us to where we are today, where we have all-party agreement to move this piece of legislation quickly through this House today so that the 40,000 franchisees out there who are waiting for this will have to wait no longer.

The government agreed, just to put it on the record, to an amendment to the fair dealing clause to include "commercially reasonable" in the definition-that was suggested by a number of presenters at the hearings-and an agreement to include myself in the development of the regulations that will follow the passing of this legislation and a commitment in writing to some language under the disclosure clause to red-flag issues around the sourcing of products and a reference to the need for a statement on dispute resolution mechanisms available to both parties in an agreement. These references put these issues clearly on the table among a number of other important commitments to be dealt with by the parties to agreements and I think ultimately down the line to be dealt with again by the government.

There was also a very important agreement on a letter to be sent to the federal government on the issue of sourcing, which I believe I have here somewhere and in fact wanted to read into the record-here it is-that I think is very important as well, because the issue of sourcing and competition in franchising is of some real concern to a whole lot of people. I will read this:

"Dear Minister:

"Today the Ontario Legislature passed the Arthur Wishart Act (Franchise Disclosure). This act establishes standards for the disclosure of information by franchisors, ensures that franchisees have the right to associate, and requires fair dealing by both parties to a franchise agreement.

"During public hearings on this bill, the standing committee on legislation and private bills received submissions about restrictive product supply/sourcing practices that are common in many franchise systems. …

"This issue was raised at the committee's hearing in Sault Ste Marie, and I want to acknowledge that Mr Tony Martin, the MPP for Sault Ste Marie has been actively engaged in this issue for some time. Other members of the committee, including Mr Michael Brown, MPP for Algoma-Manitoulin, have
also raised this issue with me and I share their concerns.

"I note the April 17, 2000 announcement that the federal government is consulting on possible changes to the Competition Act and I ask you to include the issue of restrictive product supply/sourcing practices relative to the franchise marketplace and to discuss improvements to the act within the context of the Competition Act review.

"While Ontario is moving to require disclosure to perspective franchise investors, the franchise marketplace operates within the context of federal competition law. Ontario supports changes to competition policy that foster growth and competitiveness within the small business sector, while
ensuring that the franchise marketplace is in compliance with both the letter and spirit of competition law."

In closing, I'm also happy to tell you that the government has agreed to an amendment introduced by myself and unanimously supported by all of the members on the committee, including my colleague from Ottawa-Vanier and the members of the government side, Mr Gilchrist and Mr Gill among others. The short title of the bill would become the Arthur Wishart Franchise Disclosure Act, and that's in keeping with the effort that Mr Wishart made back in the late 1960s and early 1970s to get this issue on the table.

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

Copyright © 1999-2000
Office of the Legislative Assembly of Ontario
Toronto, Ontario, Canada


Risks: 30 different programs of kickbacks, shelf allowances and inside money, 5,000 new lawsuits per year in Ontario, Canada, 80 per cent of food distributed by 2 vertically-integrated groups of companies in Ontario, Canada , Arthur Wishart Act (Franchise Disclosure), 2000, Canada, Attempts to rehabilitate image, Canadian Alliance of Franchise Operators, CAFO, Canadian Franchise Association, CFA, Commercially reasonable exercise of discretion, David and Goliath story, Encroachment (too many outlets put in territory), Evils of the system defined in 1971 (Grange Report), Fear of poverty, Fear, distrust, hate and contempt, Franchise Sector Working Team, Gag order (confidentiality agreement), Grange Report, Immigrants as prey, Indentured servants, Les Stewart, Lorn Austin, Lorne Austin, Lawrence Austin, Must buy only through franchisor (tied buying), Language shortcomings create a vulnerability, McLaw: toothless legislation designed to protect the dominant parties, Money swears, Ontario Public Hearings, Canada, 2000, Political champions, Private Members’ Bill, Relationship legislation, Retaliation, Selling around a disclosure document, Termination of franchisee, mass, Tony Martin, Wild West of the business world, Canada, 20000517 Tony martin

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License