Jim Watt, PEI Public Hearing Testimony

…because our contract is fair and it is reviewed on a five-year program with the corporation to ensure that the viability of both the franchisor and franchisee, it’s just a very fair program and that’s why legislation was needed that there were a lot of small people, business start ups. They were not treated fairly by some of the franchisors and they lost their equity. I mean, that’s a concern. Personal friends of mine have been involved in that as well too.


Legislative Assembly of Prince Edward Island
October 25, 2001

Public Hearings on draft franchise legislation
Charlottetown, PEI, Canada
Jim Watt, franchisee

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


BETH MacKENZIE (PC) CHAIR: Good afternoon to everyone. We will begin this afternoon’s proceeding on the Standing Committee on community Affairs and Economic Development, hearing public consultation on the draft franchise legislation that is before the committee. We have a fairly busy afternoon and I’d like to begin with our first presenter, Jim Watt. Good afternoon. Welcome.

JIM WATT: Good afternoon, thank you.

BETH MacKENZIE (PC) CHAIR: You’ve been allocated a half-hour for your presentation.

JIM WATT: I won’t be that long. I’ll be very, very brief. My name is Jim Watt. I am the proprietor of the Canadian Tire Associate Store here in Charlottetown, operating under my company, JF Watt Merchandising Inc. that is a fully registered company in the Province of Prince Edward Island.

I’ve been with Canadian Tire as an associate dealer since 1978, and I’ve operated stores in Wingham, Ontario; Marystown, Newfoundland; Summerside and Bloomfield, Prince Edward Island; Scarborough, Ontario; and back in Charlottetown since 1993.

Our organization, the Canadian Tire Dealers Association which represents our 435 associate dealers, men and women across the country have supported the legislation, franchise legislation in both Alberta and Ontario. There is a need for legislation. I’m not sure that some of the wording on the one we have today is exactly what we need but I’m not going to get into that because I know other people have done that.

I would like to say that profitable franchises that work are important to the economy of Prince Edward Island. They employ Islanders, many Islanders with all the spinoffs from employment. They support local businesses. The contribute taxes to the province, both corporately and personally, the franchisee. And because the franchisee lives here on the Island and will probably retire here on the Island, the province will benefit from the wealth that they have accumulated for the duration of that person’s life. And I think that is a very, very important point that many governments miss, that the personal taxes and invested wealth in the community is often overlooked.

This, our associated dealer, the first associated dealer with Canadian Tire started with our founders, A.J. and J.W. Billes, and it started with a handshake, our agreement because in those days, your bond was your word. Over the years, a contract was developed between our corporation and the dealers. It has been worked on many times over the last probably 20 years, through our Canadian Tire Dealers Association that I’ve served as president for two years. We have an executive director and an 18-member board that works in every avenue from distribution, IT, freight, human relations, marketing, advertising, service centre business. We are fully involved with the corporation on all aspects and are a full partner in that.

Our association, on a regular basis, works with the corporation to ensure that the financial agreement in our contract is working to keep both parties financially healthy and that’s absolutely imperative. If the formula doesn’t work and it’s out of kilter then either the corporation or the dealers will suffer. And if they suffer, then the enterprise, as a whole, suffers. And we have had a couple of experiences where we’ve gone into the US and the US market. We have not taken our whole package down there to the US market and we’ve been unsuccessful. The program that we have works. It works well. It’s worked for almost 80 years and is continuing to work and will work in the future.

I would like to say that franchisees and franchisors must treat each other fairly in all aspects of their operation. A fair agreement that is beneficial to both parties must be entered into and neither the franchisee nor the franchisor should change the agreement at the expense of the other one. Nor should the agreement be so one-sided that the franchisee has no rights or protection. A fair and honest contract must always prevail. And we have a contract that is X number of pages that covers absolutely everything from A to Z, soup to nuts, back and forwards. When we sell our stores, we have a manual that covers absolutely everything we do from the nuts and bolts to the paperclips to the computers, to the front-end equipment in the shop. Everything is covered. Everything is laid out. It’s very plain. It’s very fair and good franchise contracts are fair to both parties, fair to the people that are in both of them, fair to the communities and fair to the province.

Unfortunately, not all companies are like Canadian Tire. That is why legislation is important, to protect Island businesses, men and women who as entrepreneurs want to make a better life for themselves and for the province. And you just have to look around the community at the many franchisees on the Island that contribute to the Island in many ways in their time, their fundraising drives, their contribution to the community, and to the hospitals. They’re actively involved in the communities far more so than many of the large chains. So franchisees are absolutely imperative part of the community.

So that’s basically all I came to say and you will probably have some questions for me.

BETH MacKENZIE (PC) CHAIR: Yes, thank you very much for your presentation.

HON. MITCH MURPHY (PC): Jim, just one question, since your organization, I take it, probably has participated in and followed along the implementation of the legislation first in Alberta and then in Ontario. I would ask you to comment basically on your feeling on the effectiveness of the legislation, particularly in Ontario, as opposed to what is in the draft legislation here and how you feel that that treats both franchisors and franchisees.

JIM WATT: Unfortunately, I’m not a lawyer so I don’t get into all the details and I don’t have a copy of the Ontario one with me, but there are some pieces in here that I don’t think are in the best interests of both parties. I think that there are, I know that some other people are going to speak to them after, I don’t want to steal their thunder. But section 18, is one of them.

HON. MITCH MURPHY (PC): I wonder if you will, and perhaps you don’t want to, perhaps you want to leave that…

JIM WATT: I’d like to leave it to the people that have had done a lot of research into this and I don’t want to steal their thunder, as they say. But in Ontario and in Alberta, we had to make no changes to our contract to be in compliance with it because our contract is fair and it is reviewed on a five-year program with the corporation to ensure that the viability of both the franchisor and franchisee, it’s just a very fair program and that’s why legislation was needed that there were a lot of small people, business start ups. They were not treated fairly by some of the franchisors and they lost their equity. I mean, that’s a concern. Personal friends of mine have been involved in that as well too.

WES MacALEER (PC): Yes, Mr. Watt, well I certainly can attest to your own participation in the community and that Canadian Tire is very laudable. I guess I’d be interested in three questions being answered by yourself. Out of this morning’s discussion, there were a number of issues that arose and I’d be interested to know what your agreement or what your experience has been. The franchise agreement that you’ve signed with your franchisor or with Canadian Tire, where would a dispute be adjudicated? Would it be…

JIM WATT: In Toronto.

WES MacALEER (PC): You don’t see, that’s not an issue with…okay. Do you have territorial protection in your agreement?

JIM WATT: Not necessarily. There is a procedure that the corporation goes through. They are business people. They are not going to invest in the store that they’ve just built here in Charlottetown or the one in Summerside and drop one down by the bridge. It just doesn’t make economic sense. They do financial studies. We are a public company. They have a board of directors to report to and if they build stores, then they’ve got to produce. Good business acumen will always prevail. Do they make mistakes? Yes, they do. We have a couple in Western Canada that they have not done too well with but generally they’re spot on their estimates.

WES MacALEER (PC): Then as I understand from what your explanation is, Canadian Tire, when they deal with a prospective franchisee, deals with that franchise directly as opposed through an agent?

JIM WATT: That is correct.

WES MacALEER (PC): In other words, they don’t send people out selling their franchise on their behalf? Is that right?

JIM WATT: Yes, you have to apply. That’s correct.

WES MacALEER (PC): What about purchasing? Do you have any restrictions on your right as a franchisee to purchase product locally or at a lower price than what you can get it from or is that…?

JIM WATT: No, we purchase 99.99% of the products through the corporation. That’s how the agreement works. That’s how the margin is split. If we are in a situation where something is local, like peat moss, we will get what is called a Foreign Merchandise Authorization form. We do the calculated split of the margin with the corporation and we buy it, and we buy it from Lennox Island, right now. If there’s something else local that we need, whether it’s a fishing lure in Western Canada, if we see an item that’s local that they want to bring into the warehouse, we can go ahead and do that with a, but we have to get, there’s a procedure. But we’re never turned down, whether it’s a kettle to take hunting in Newfoundland, I mean they’re okay with that.

WES MacALEER (PC): Thanks.

HON. RONALD MacKINLEY (L): Canadian Tire, you guys are across Canada, right?

JIM WATT: That’s correct.

HON. RONALD MacKINLEY (L): And one of the reasons you got the franchise is because of your buying power. You’re the person that has the franchisor, right?

JIM WATT: That’s correct.

HON. RONALD MacKINLEY (L): Has the buying power of Canadian Tire, is that not correct?

JIM WATT: That’s correct.

HON. RONALD MacKINLEY (L): Now for instance, you guys had generators on sale about a year ago.

JIM WATT: That’s right.

HON. RONALD MacKINLEY (L): Now did they come through Canadian Tire or did you buy them yourself?

JIM WATT: No, they came through Canadian Tire. Those happened to be leftovers from the Y2K scare and they were clearing them out. They make them available to all of the stores across the country. We had a market for them and we bought them.

HON. RONALD MacKINLEY (L): Like I know you sell, actually I got a mig welder in there a week ago.

JIM WATT: Thank you.

HON. RONALD MacKINLEY (L): Well, it wasn’t because of Canadian Tire. It was because you had the price on it. My brother was over in Moncton and I went to Princess Auto and they had done there and they had a cheaper model on sale, but anyway they had a Lincoln. So I asked him, do these things ever come on sale? And he said never. I said to him, I wasn’t busy, I was just nosing around. I had some time to spend there. My brother was sick. I went down to Canadian Tire in Moncton. Sure enough didn’t I get your flier and they were on sale. But then I didn’t buy it there. I cam back to PEI and went in and got one before you ran out of them. But it wasn’t on sale. Like it seems what keeps Canadian Tire successful, is your massive buying power.

JIM WATT: That’s correct.

HON. RONALD MacKINLEY (L): Because if you look at those generators that 549, like nobody else could touch that anywhere that I ever heard tell of in Canada.

JIM WATT: That’s one of the reasons we don’t have to buy outside very much.

HON. RONALD MacKINLEY (L): I mean your, and you’ve got everything a person needs. But anyway I just, see it’s your buying power so the buying power for this franchise is working for all the people that has the stores.

JIM WATT: That’s right. But if people didn’t buy through the corporation, they’d start to (INDISTINCT), that’s when you have problems for both parties.

HON. RONALD MacKINLEY (L): All right.

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

JIM WATT: Thank you.

This document is 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, Independent franchisee association, Development agents, Encroachment (too many outlets in area), Good faith and fair dealing, Canada, 20011025 Jim Watt

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