Bush Dumville, PEI Public Hearing testimony

…there is no way the average person on Prince Edward Island, that scrapes up, sells his home, mortgages his home, we’re all, everybody behind me here have been in that position at one time or another and puts his life savings on the line. And if a dispute should arise, they do not stand a chance against the multinational corporation and their cadre of lawyers.

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Legislative Assembly of Prince Edward Island
October 25, 2001

Public Hearings on draft franchise legislation
Charlottetown, PEI, Canada
Bush Dumville, franchisee

Standing Committee on Community Affairs & Economic Development
Session 2/61

BUSH DUMVILLE

HON. MITCH MURPHY (PC): Good morning, ladies and gentlemen, I think we will commence. Our Chair has been detained with other business for a few minutes but she will be joining us shortly. I just want to welcome you there this morning, on a series of public meetings today with regards to franchise legislation in the province of Prince Edward Island.

I just want to introduce members of the Committee, Mr. MacKinley, the Leader of the Opposition will be joining us shortly as well, Wilfred Arsenault, MLA for Evangeline-Miscouche; Wes MacAleer, MLA for Charlottetown-Spring Park; and myself, Mitch Murphy, the MLA for Kensington-Malpeque.

We would ask that during the presentations that people would stick to the time frames that are outlined. We have approximately 14 presenters today and it’s going to be a full day, so we would ask that you be brief and to the point with your comments and that you would also allow some time at the end for some feedback discussions and questions. We don’t want to be cutting anybody off who has not fully had an opportunity to say what they want to say.

So with that, I guess I would welcome the Chair, Beth MacKenzie, and we would call on the first presenter this morning, that would be Bush Dumville and we would ask you to come up to the table here.

BUSH DUMVILLE: Honourble Members, Honourable Madam Chairperson, members of the media, honoured colleagues that are with me here today. It’s kind of ironic that I get here today to talk to this committee. I’ve been a franchisee since 1979, and possibly a little over ten years ago, I seen the need for some sort of franchisor/franchisee legislation in this province. At that time, I brought the Alberta legislation that is the only legislation in Canada at the time, Ontario didn’t have such legislation. I had a colleague of mine, Mr. Rundell Seaman, so we went to the former liberal government and met the attorney general and presented the Alberta legislation and basically said, we believe that this province needs such legislation and just asked them to create legislation along that model.

In my franchise career, I happened to have had a very good relationship with my franchisor, still do. Before I come before any committee, I would say, I would urge the committee to have balanced legislation. That’s what all this legislation is about. It’s not to have one party have an advantage over the other. The franchisor has rights as well as us franchisees. Keeping that in mind, I went to my lawyer, some 21 years ago. It happened to be Jack O’Keefe at the time, presented the franchise document to him and the advice of my lawyer at that time was from a legal point of view, Mr. Dumville, I suggest you do not sign this document because it’s all slanted to the person that has drawn up the document.

I said, “Okay, what do I do now?” Then he says, “well, now, after having said that, as your lawyer, as your friend I will tell you that the best thing you could do is sign this because if you do not sign it, there’ll be ten other people waiting outside the door only too happy to have the wonderful chance at obtaining this franchise.” So there was no real bargaining power in that.

I think sometimes when you see a lot of people getting in trouble in the franchise community as franchisees, they’re young people coming in. They have the world ahead of them. They’re eager to make, to create a good life and sometimes these franchise agreements are maybe a little too attractive. The franchisor, they’re sales people too, and they want to sell franchises and they want to develop their chain. By the time you get to the bottom of the franchise agreement, you will find a little note that kind of encapsulates it all in fine point. You know, please be advised that this franchisor does make recommendation that your individual franchise will necessarily be successful. We advise you that franchise failures have and will occur, have so in the past and will so in the future, so it’s like a catchall phrase at the end of the agreement.

Now at the time, my biggest concern was in my agreement. Our head office at that time was in Toronto, Ontario. Our head office is now in Miami, Florida. The biggest thing, fear that I had was that if there was a dispute arose between me and my franchisor, thankfully none has happened, I would have to defend myself in the city of Toronto in the province of Ontario which puts me at an extreme disadvantage because you can’t take flights in there, rent a hotel room, rent a strange lawyer and hope to have a fair playing field with a head office that has their corporate lawyers in place and that’s just their everyday business. So that was my biggest concern.

Now in our chain in particular, it has been fairly progressive internally. We have a lot of franchise communities that work very hard with our corporation and they’ve made numerous improvements to our agreements. Like we used to have to have, if we sold our franchises, it would cost us $20,000 as a franchise fee. It’s been reduced to $5,000. If we sold our business, like if you were approaching say, a 20-year franchise life expansion, when your franchise reaches 18 or 19 years, you have nothing. All the goodwill you built up over the years, there’s nothing left for you because the purchaser is not going to buy a franchise with only one year left in the agreement. So when you reach that 20 years, you’re in a very vulnerable position.

In our case, if you signed on for an additional 20 years, and after two or three years you decided to take some remuneration for your hard work, what would happen is, you sold it to another party. Then what would happen, you basically have, if that second party failed, you had to guarantee of the rent and a royalty for the next 18 years. My understanding of good business practices, you sell a business to have less risk and enjoy your retirement years.

We have a couple of remaining serious issues which our franchisor really, especially in this country, there’s been some complaints in the States, that could result in a problem but hasn’t to this date because our franchisor is exercising good business principles. Not that he’s legally bound to do so. One of them is encroachment. My franchisor could build a Burger King across the street from me on University Avenue. He has the right to do that and that would eventually destroy my business. Of course, maybe the Mayor will get there first and get the new Sports Facility in there.

Pricing, it’s written in our franchise agreement that failure to follow suggested retail pricing, we’re all independent businessmen and nobody can dictate pricing, we know that. It’s against Canadian law. However, the franchisor has programs from time to time that they want you to at lease follow suggested retail pricing so when they advertise, they can, a customer can reasonable expect to get the same offer in one location as another and that is reasonable. But it could default your franchise agreement.

Presently, alternate dispute resolution exists mainly in the USA because it was litigated. It’s there because of regulation. Canada is sadly behind in the regulation curve. We’ve only got two provinces that have seriously looked at this issue, Ontario and Alberta, and I hope Prince Edward Island will be the third.

I stress to this committee that this, I’m here basically as an independent. I owed it to the group that are here making presentations today to say that there is no way the average person on Prince Edward Island, that scrapes up, sells his home, mortgages his home, we’re all, everybody behind me here have been in that position at one time or another and puts his life savings on the line. And if a dispute should arise, they do not stand a chance against the multinational corporation and their cadre of lawyers.

On behalf of the franchisors, I would caution you to show good restraint to make sure that this is not a witch-hunt for franchisees, that franchisors have rights too. It’s just been that in the absence of all franchisees being the party that going, after all, the franchisor is the one that invented the system in the first place. They have certain rights but not overbearing rights. So I would highly commend this committee to recommend and adopt legislation that is accepted throughout the capitalist world in protecting its citizens.

Ladies and gentlemen, it’s just simply modernizing this province of Prince Edward Island with the protection and rights that both parties should have and deserve. Thank you for listening.

BETH MacKENZIE (PC) CHAIR: Thank you very much for your presentation. Are you open to questions?

BUSH DUMVILLE: Sure.

BETH MacKENZIE (PC) CHAIR: Any questions from the Honourable Mitch Murphy?

HON. MITCH MURPHY (PC): Mr. Dumville, you said that when your head office was in Toronto you were obligated to go there in terms of any action. Now that that’s moved to Florida, I assume that that’s the situation if you were to contest a dispute legally with your franchisor. You would have to do it where their head office is located?

BUSH DUMVILLE: I’m assuming that. I haven’t been advised as such.

HON. MITCH MURPHY (PC): The other questions I had was I guess to and this will probably come out during the course of the day, but I want, if you will, to just quickly take us through what would happen in your circumstance, where the franchisor had a difficulty with your operation. Let’s say, do they now have the authority to say that, you know, for 30 days your license is pulled, your agreement is null and void. What protection is presently in that agreement that you have signed with your franchisor for you the franchisee? So if you meet certain standards, if your company performs to a certain level, are you protected or can they on a whim, come in and pull your license?

BUSH DUMVILLE: I think legally they could almost pull my license on a whim. However, I think they would look very bad in doing so. I think there’s certain rights that a franchisee, I believe it would be a six-month process. I don’t think I’d be out in 30 days. I have heard of occasions of certain companies that they come in, one day you’re there and the next day, they’re telling you to clear off the shelves. This franchise is one of the big multinational franchises and by its own size, it wouldn’t throw you out over night. But it would have you out in a matter of months.

HON. MITCH MURPHY (PC): I guess if I can, Madam Chair, I’d like to follow up with the reverse of the question. In that agreement, what protection is there for the franchisor to ensure that the operation that you’re carrying on with that name that it’s being held to a certain standard that the company wants to see being held to. What protection is in that agreement for them if you do not meet those obligations?

BUSH DUMVILLE: They have standards of cleanliness. We have QSC, quality, service standards and they evaluate us regularly. They’re in our stores. They’re giving us assessments. They’re giving us tests. It would take them two or three months to build up a case to say that you’re not living up to the operational standards. Their easiest ways to exclude somebody would be say, you can’t operate this restaurant according to our standards and according to how we want our customers treated. But they have information on who is a good operator and who is a bad operator and along the lines. But in our company, it’s pretty good, like there’s, you know, as long as you’re trying, I’ve seen a lot of goodwill even when you have a problem.

WES MacALEER (PC): Madam Chair, I have a question for Mr. Dumville. You quoted the Alberta and Ontario as an example, the two jurisdictions that have legislation. In terms of what your franchise does in those jurisdictions, are you aware of any limitations, both from the franchisees’ or franchisors’ point of view in dealing with the legislation that these two jurisdictions have enacted?

BUSH DUMVILLE: I’m not aware of any, no.

WES MacALEER (PC): So you would think that those are models that we should be examining in terms of drafting our own legislation?

BUSH DUMVILLE: Yes, I do.

BETH MacKENZIE (PC) CHAIR: No further questions? Thank you very much for your presentation.

BUSH DUMVILLE: Thank you for hearing me today.

This document is a spelling-corrected copy of the Verbatim Transcript of House Committee Proceedings, Province of Prince Edward Island, Canada.


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Risks: Prince Edward Island Public Hearings, Canada, 2001, Access to justice, War of attrition, Disputes heard on franchisor’s home turf, Encroachment (too many outlets in area), Price fixing, Canada, 20011025 Bush Dumville

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