Tim Banks, PEI Public Hearing Testimony

And he built up a business and then all of a sudden, this national company comes in and says, hey, we want so much more per cent (INDISTINCT) reasonable from you in order to sign this contract again. Plus we want, we’re giving you less per litre. And he was just out the door like that. Now here’s a person who was in the community, built it up, the business hasn’t got taken off yet and how do we protect somebody like that? He was an Islander dealing with a multinational corporation.

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Legislative Assembly of Prince Edward Island
October 25, 2001

Public Hearings on draft franchise legislation.
Charlottetown, PEI, Canada
Tim Banks, franchisee

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

MR. TIM BANKS

BETH MacKENZIE (PC) CHAIR: Tim Banks.

TIM BANKS: Chairwoman and panel guests, thank you for allowing me to make my presentation today. The last time I was here was on February 23, 1996 and I would like to pass on my comments because it is a related issue. This particular issue was called Red Tape Committee hearings, talking about he red tape in government and I had given my opinions there in writing and I’d like to pass them on to your committee.

BETH MacKENZIE (PC) CHAIR: If you’d like to give them to the Clerk.

TIM BANKS: I will do that. I will also leave an available stack here if anyone would like to pick one up. Basically what the issue was at the time there was government got into shopping centre legislation, was one of the issues and the other issue was IRAC and they created a whole bunch of rules and regulations that prevented business people from going forward in our province, just a whole bunch of legislation.

So why I’m here today is I seen the ad in the paper and just to give you a little bit of background. I am a franchisee. I own the largest Home Hardware in Canada, over in Southport. I also have a franchise for Radio Shack; for Pratt and Lambert Paints. I’ve had other franchises; Color Your World and like Mr. MacPhee, the Color Your World deal went sour; the people that owned it sold it to ICI, another group; in fact ICI’s lawyer is here in the room, represents the franchisor. We also were involved in National Video which was a franchise, that they, the franchisor went sour. So it works both ways.

Today I currently am active here in this province alone in building a new Smitty’s in Summerside. That is going to be a franchise license; it’s going to be signed. I’ve inked a deal with A&W Food Service to bring a new A&W to this particular community. I have a letter of intent from Mikes Restaurant, a Quebec franchise, to build a restaurant, Mikes Restaurant, here in this particular community that will be franchised. I’m currently dealing with the new Pizza Delight offer which will be a franchise in West Royalty. I’m currently dealing and have a letter of intent on a new Pizza Delight in the north end of Summerside.

I’ve done a lot of business on both sides of the fence, as the franchisee, as sort of the broker in between. I’m also a franchisor on a much smaller scale. We have a sign company. We sold a little franchise here in Charlottetown market place. When our fight with the franchisor on Color Your World didn’t work out we come up with our own deal and we expanded the House of Excellence Program that we own and we brought in another paint line, Pratt & Lambert. We’re doing very well in that business; tripled the sales.

On this particular legislation I don’t have any real problems with the, you know, when I look a the Ontario and Alberta legislation and I’ve got them right here and I’ve personally looked at them and I went home last and I read the proposed draft and maybe I could ask your committee, who did the draft document? Was it the government that brought it forward?

BETH MacKENZIE (PC) CHAIR: No, the history on the legislation is it was a private members’ bill introduced in the House.

TIM BANKS: What private member?

BETH MacKENZIE (PC) CHAIR: Andy Mooney.

TIM BANKS: So he was from Souris.

BETH MacKENZIE (PC) CHAIR: Yes and he brought it forward.

TIM BANKS: So he got the document from Mr. MacPhee because he had a little debate about the issue here. So MacPhee would view that draft, because the problem with my being here is this: is I went this morning to my lawyer, Jim Travers, and I gave him the Alberta legislation and I gave him the Ontario legislation and I gave him the draft legislation and I asked him to make comments for the record which I will turn over here, comments, if anybody wants to pick them up. I’ll put them there. And essentially he says the thrust of both statutes…now Jim Travers, he’s not Loblaws lawyer, in fact, he works, their firm I think works for the other side of that, you know, little fight that goes on. He’s not a Liberal either, I can tell you that.

HON. RON MacKINLEY (L): You should have one.

TIM BANKS: I should have a Liberal lawyer but I’ve got a Tory lawyer and he’s got a lot of experience in legislation for both the government in drafting it, reviewing it and presenting it forward. Now, I gave him the three documents. I asked him to review them. His comment was the thrust of both statutes is to require disclosure by the franchisor to a franchisee in setting for the civil remedies that may be pursued if there has been any misrepresentation made in the disclosure document. In neither statute is the government given any role in enforcing franchise agreements nor are any of the offences created in those statutes. Both statutes essentially create a civil code setting forth the duties of the franchisee and the franchisor and the civil remedies each may have against the other without the involvement of government.

Now he makes a total of eighteen comments and they’re pretty serious comments with respect to the issues. One of them is this, I will read it to you. “Section 18 imposes personal civil liability on all directors of a franchisor for any alleged contravention of the Act by a franchisor.” Such a section is utterly ridiculous and would make the province the laughingstock of the country if it were enacted.” That’s what that draft would do. It would make us, we’d be the laughingstock of the country.

And I won’t go…such a section, it says here, “Securities legislation across the country do impose civil liability upon directors for certain actions but those liabilities are clearly prescribed and directors can avoid liability as long as due diligence and/or lack of acquiescence in the action complained of is shown. No such provisions are contained in this section. If the province wishes to have all franchise activities cease in Prince Edward Island, the enactment of this legislation would be one way to guarantee that result.” That’s his view. Now that’s a legal view. He studied the draft legislation and he’s saying it’s a pretty serious document.

In fact, in one other comment he puts “Section 29 is the section which would be more appropriate in Stalinist Russia than in a country with a free market economy. By giving the minister the ability to make an “interim order” which can be extended until the matter can be brought before the court, the minister would have the right to impose his version of business practice on the parties rather than allowing the parties to utilize the civil system which applies to all other business relationships.”

He closes by saying “I will also note the Act is completely silent on wrongful acts by franchisees such as franchisees purporting to unilaterally terminate a franchise agreement. The lack of balance in the Act clearly shows the motivation of the parties who proposed it.”

Now I’ve given you the document for the record. I’m not going to bore you with all the technicalities of it. But as an Islander that’s been here, my family has been here for six or seven generations and as a business man who tries to operate a business here, I can’t believe we’re in here talking about this. I have nothing, no problem with legislation that relates to Ontario or Alberta but this particular draft is dangerous. What it does is it sets out a mechanism that’s going to stop franchising coming to the Island and all the new jobs that we talk about. That’s what it’s going to do. It’s going to scare the franchisors off of coming here to the Island. That’s my personal opinion.

But I have a lot of experience at it. We’re currently working with Bulk Barn: First Choice Haircutters in a couple of locations; we’re dealing with Boston Pizza in play now for a location; Microplay in another location. There’s all kinds of franchisors want to come to this market place.

HON. MITCH MURPHY (PC): I don’t mean to interrupt you, Mr. Banks but I want to make something, I think, clarified. It’s that any, and this is the Legislature, if you’re sitting Minister of the Crown and you introduce a bill, it’s a government bill. Any member that’s elected to the Legislative Assembly has the right ot introduce legislation. Anybody at this table can introduce legislation.

HON. RON MacKINLEY (L): Providing you get a seconder.

HON. MITCH MURPHY (PC): Yes, it has to be seconded. Once that legislation is introduced it’s put on the floor for first reading. Then the Legislature, not Government: Legislature has to make a decision how they want to deal with that legislation. They can either second reading; third reading; pass it and it becomes law. Or they can refer it to a committee such as ours to hear different perspectives on the legislation.

So in query to why this committee is sitting and meeting over the legislation, that’s why. It’s our job to make a determination on what the committee’s view is of the legislation based on the people that have presented to us here today; go back and report to the Legislative Assembly. And the Chair of this Committee will write a report on behalf of the members of committee and we will sign it and then the Legislature will have a decision on what they’re going to do. Are they going to proceed? Are they going to scrap it? Are they going to proceed in some other form?

Perhaps you understand all of this. I’m just getting the feeling from your comments that that’s not your understanding of the process.

TIM BANKS: Well, I guess that’s the problem in PEI. The process requires me to have a lawyer to explain all this to me and I just want to run a healthy business and unfortunately I’m getting paranoid now because I see these here ads in the paper now talking about franchise legislation and like the issues to me are the daily issues that cause problems in my business.

What I’m trying to say to you is that I think if you want to enact legislation and we want to set out some examples there’s nine provinces in Canada that have a National Building Code and two territories and they have set standards that’s done nationally. We’re the only province in Canada that doesn’t have it, throughout the Island. And I think that the government would be more prudent in working like that when it deals with the health and life safety of people inside of buildings. But here we’re talking about a very select few people that are dealing with franchise agreements. It’s not the general public.

And so I’m not throwing it at you guys as the government but I see the ads in the paper and it just gets me paranoid about the issue because I’m trying to make a living and I’m trying to grow my company and trying to grow the businesses I do. And the thing about it is, franchise life has got its problems too but the issues, I deal with them every day.

At Southport Home Hardware, we had an existing franchise; we wanted to move it down the street and one of the existing franchisors in Charlottetown market place didn’t want us to do that so he objected. They wanted us to go to St. Jacobs, Ontario and sit in front of a board and talk about the issue. Well, I had run my business. So I made my case myself through my paperwork and I went forward and the whole time I was going forward I just decided well maybe I don’t need to be a Home Hardware dealer, I’ll build the building and we’ll flip to another franchise. But that’s what you’re doing to run your business. We got our store open: we created a lot of jobs; a big investment in the community.

But I tell you, you want to scare me; tell me that I have to negotiate that before….well, first of all the minister could walk right in and put an interim order that could stop me out there from doing what I want to do as a free enterprise business man. That’s what that legislation would allow him to do. Then if a minister didn’t like me, not that I think there would be any that wouldn’t like me, but I’m just saying if a particular minister didn’t like me he’d have the mechanism right there. I don’t see it in any other legislation on the Island; particularly one that deals with so few. It’s not a big broad issue here on Prince Edward Island. But I sure as hell wouldn’t want to be in that franchise debate between an existing franchisee and a franchisor and be coming to a government office to deal with it. It would be just….I’ve got enough problems running my business, Mitch. It’s like tough, it’s really tough out there. And the only way to keep it going is to keep that free market enterprise going.

And I’m not changing my mind here. I get beat up everyday; people come along. Like when Sherwin Williams opened their new store in Charlottetown I’m not going to go and object to it. I’m not going to appeal it or try to stop it or do anything like that. I’m going to look at them as a friendly competitor that when we get in our own store we’re going to figure out how we’re going to compete against them. But I don’t need to go and arbitrate it.

You know, it’s one thing….I have a lot of respect for the MacPhees in Souris and if they’ve got a bad deal going on one side of their business I can’t help that. Like, they’ll get it sorted out between whomever, it is and they’ve got options. They can go to Sobeys, they can go to….and the thing about it is if your legislation came in and kind of monitored the two of them there’s nothing in the legislation to stop Sobeys from going across the street while those two were bickering on the way the business should be run.

Like, if you looked at this legislation as I see it, you know, would it have helped keep Eatons in Charlottetown? Would it have kept Henderson & Cudmores going? And then we’d be into talking about franchise, where the location is and then, you know, could I….like we talk about the Tide. Mr. MacPhee, if he gets a good deal on Tide he’s a really lucky business man because he can sell it in his Pharmasave and he can sell it in his Home Hardware. I sell it in my Home Hardware. And if he’s precluded on his existing franchise agreement that he can’t buy it and put it in that store in that network then try it somewhere else. Be creative, get out of the box. It’s the same way as if I couldn’t make a deal with Color Your World I’m moving on. Right. That’s what I’m going to do.

And Ronnie, talking about one day being a big deal, with a franchise they’re going to throw you out in one day; that’s how governments are done. They’re gone in one day, right? You have an election that night and you lose, you’re tossed, you’re gone. (Laughter) I’m just, I’m not….

HON. RON MacKINLEY (L): You know it’s been coming up for three years.

TIM BANKS: No, but I’m frustrated because like we have a tough, tough time in this community as business people. And I’m in there and I’m working with little guys and big guys and big corporations and to talk about you can’t sue anybody. Like you’ve got a remedy here on PEI. You go down to the Court. I got, well little Donny Brook with the Irvings; like they could crush me. But I won in the court system. I got my cheque and I still work for them and they’re a great company.

So I would really like you please to have a look at just a quick lawyer’s review of the thing. But I want to really take a good common sense approach here. There’s a lot of things, good things, that the government have been doing and there’s a lot of good things that you could continue to do. But spending time here to police a bunch of guys, like the policing you’re going to deal with is….like Mr. Dumville came forward and like I can understand where he’s coming from. Maybe, maybe Burger King want to put a store on North Granville Street in Summerside and maybe he’s stuck with his own building down town. I don’t know; but there’s always issues. But he’ll sort them out because most of those companies like Canadian Tire and Burger King and those guys they have their reputation at stake too. They don’t want to go to court, they want to work it out. And its buyer beware big time.

Could you give me a couple of minutes just to look at some of the notes I have here today and then I’ll close off?

See, it works both ways, the box of Tide, right? Mr. MacPhee, like at the Home Hardware deal we’re in the other day….here’s an example. Danny Murphy is building a new horse barn and one of our contractor is supplying the wood and that contractor wanted to get the sheaving, the plywood sheaving for the building. Now the network I’m in we made a commodity decision to buy plywood and we bought it, probably the wrong time of the year and the market went down a little bit and Schurmans got the plywood for two dollars cheaper. Now, I could have went outside the Home buying group and I could have went to somebody locally right in the marketplace and got that sheet of plywood but I’m not supporting my agreement and the rest of the dealers in the big picture. That’s what it’s all about, right? I’m networking with them and they’re not here today.

Now on the closing of this here thing here today I’d suggest that there’s going to be a group called Islanders for Franchise Law; one of Mr. MacPhee’s employees as the Chair. Now, I’ve got three franchise managers down here and I could come up with some creative name and get a couple of hundred people signed it. I don’t want to make a mockery of this place. This is like, this is, it’s wrong. So I thank you for letting me have my two cents and I’ll answer to the best of my ability any questions you have. Thank you.

BETH MacKENZIE (PC) CHAIR: Thank you for your presentation. Any questions?

HON. MITCH MURPHY (PC): You can go ahead, Ron, I’ve got to think of how I’m going to ask this question.

HON. RONALD MacKINLEY (L): Go ahead.

HON. MITCH MURPHY (PC): My concern, Mr. Banks, is this, is if I heard you correctly and you had Mr. Travis give you his opinion on all three documents, the one from Alberta and the one from Ontario. I guess if I’m hearing you correctly that just to try and summarize what you’re saying, you’re saying that either the legislation is necessary at all, that’s a debatable issue to yourself, then you would, the form you would like to see it take if it’s necessary at all would be in the pre-sale disclosure statement.

TIM BANKS: That’s correct.

HON. MITCH MURPHY (PC): IF that, if all the correct information was not provided was not provided in that statement and there was an issue between the franchisor and the franchisee, that would be pursued in a civil matter before the courts. Is that an accurate…?

TIM BANKS: That’s an accurate analogy and what I’m trying to say is the problem with the draft legislation and getting here today and seeing all the stuff in the media is that as a business person out there running a bunch of businesses in this community, the Islanders for a Fair Franchise didn’t talk to my three franchise managers or to me to ask my opinion and get my comments on the draft that’s coming forward. That, I think, is the technical problem and what we’re here today because if I’d of known it was like that, I’d of had a bunch of franchise partners that I have and all kinds of other people here with me today because they’re, like it’s tough running a business in Prince Edward Island. And we just don’t government in a civil dispute mechanism or whatever you want to call it.

It’s the disclosure issue I don’t have a problem with. You can deal with your case, like Color Your World’s head office in Ontario and when we had, whatever we had to do with them, we dealt with it down here, even though the franchise agreement, I think, said we had to deal with the laws of Ontario.

HON. MITCH MURPHY (PC): But you could negotiate that into your agreement when you were signing it?

TIM BANKS: Yeah, before you sign. If that’s a big deal with you and that’s what your lawyer says, then deal with the franchisor.

HON. RONALD MacKINLEY (L): The thing is now I’ve had, since this came in the paper, I’ve got phone calls from more than Mr. MacPhee or anybody. Actually, I just talked to Mr. MacPhee’s (INDISTINCT) today, but the thing is, I had one person I think it was one of the oil companies and it wasn’t Irvings. It was another oil company because everybody’s sort of (INDISTINCT), it wasn’t them, but he didn’t own a store. Somebody else owned the station. And he built up a business and then all of a sudden, this national company comes in and says, hey, we want so much more per cent (INDISTINCT) reasonable from you in order to sign this contract again. Plus we want, we’re giving you less per litre. And he was just out the door like that.

Now here’s a person who was in the community, built it up, the business hasn’t got taken off yet and how do we protect somebody like that? He was an Islander dealing with a multinational corporation. Like your group which is, is that just yourself or is that a group of people?

TIM BANKS: That’s myself, 100 per cent, based on Prince Edward Island with a head office.

HON. RONALD MacKINLEY (L): Okay then, so you’re the APM group. Like you’ve been into major developments and that’s fine, and you created a lot of jobs and everything. But then there’s always smaller individuals out there and what happened here was, whoever Mr. Mooney talked to, I don’t know, he brought it on the floor of the House as Mr. Murphy said. And our House, the majority of the House decided that we’d go to Public Hearings and then this committee will decide what they want to do with it, and then it will go back to the House.

Like the Lands Protection Act, that committee recommended that we increase it by ten per cent or something, yet the Premier overruled it. So it’s the way democracy works.

But the problem you have, like your lawyer there, he said, it’s like Russia or something, but see there is so many things that people ask for, regulations, is to protect people. And that’s why we ask for all these regulations. Has the red tape decreased since that hearing you were at?

TIM BANKS: Yes, the provincial government, once the Liberals, that was in February 1996, the Liberals lost government. The provincial government came in. They repealed the legislation on shopping centre development. They repealed it and got rid of the size threshold, and the province is booming in retail today. Thousands of jobs created. In fact, the growth in retail sales and the taxes going back to the province, unbelievable. Because they got rid of that legislation and they should get rid of the Lands Protection Act as it relates to commercial property ventures.

A situation, me the developer in Montague. A month prior, McKenna Brothers went in and bought a parcel of land in downtown Montague and it went to IRAC, then it went to Executive Council and got it approved. I applied as the APM group or our company to purchase that property one month later through the same process and my application was set aside. And I had a lot of technical problems when it got set aside, I had a contractual arrangement with McKenna Brothers to buy the property. I had financing from a bank out of Halifax that required me to close. And what did I have to do? I had to circumvent the Lands Protection Act and be subject to a fine of $250,000. I don’t think I could have been thrown in jail, but in this legislation, I could be put in jail for two years. Right?

So I was in this here balance of life, right? Where I can go over in New Brunswick and I can go over in Newfoundland and I can go over in Nova Scotia and buy commercial property as it is and move on and do my development but here, for some reason, the deed got before Executive Council and it got put aside for whatever reason. So the only way, so that’s what bad legislation does.

HON. RONALD MacKINLEY (L): But then from a, see you got to remember, we got to look at the whole island. You’re looking from your own business here.

TIM BANKS: Yes.

HON. RONALD MacKINLEY (L): And that’s quite right because you’re a businessperson.

TIM BANKS: But it’s free enterprise.

HON. RONALD MacKINLEY (L): Yes, I know it, but if you’re looking at that, but yet you go through red tape, and if you talk to the farmers’ group, there’s more red tape to be a farmer today than was ever in the history of the province of PEI before…

TIM BANKS: But Ron, the Liberal Government made a great attempt to talk about reviewing red tape because it was an issue when they were polling and that’s why they were having a standing committee on it. The mandate was to get rid of the red tape and there was a lot of people came here and spoke about it and this government here got rid of some of it. But now they’re back…

HON. RONALD MacKINLEY (L): They’re getting more somewhere else though.

TIM BANKS: What’s that? No, they’re coming back here with another mechanism that involves the free enterprise system, and that’s what I’m saying. I don’t think it’s good for Islanders. I don’t think it’s good for our young people. I don’t think it’s good for people out there that want to do a franchise. See what happens is I own a franchise on Prince Edward Island. Danny Murphy owns a franchise or somebody else owns a franchise on Prince Edward Island. We make the money in the franchise. We live here. Our kids are here. We’re schooled here. We spend our money here.

But if you set a mechanism in that all of a sudden, the big companies say, jeese, we’re not going to enter into any deals with franchisee there. We’ll just run a corporate store. Then the profits go out of our community and that’s what I don’t think you’re looking at. They go out of our community. That’s the big picture. Investment back into our community and franchising allows that. You’ve heard Mr. Watt make the comment that franchising is good and it is good.

BETH MacKENZIE (PC) CHAIR: Thank you very much for your opinions.

TIM BANKS: Thank you.

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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