Proposed franchise legislation proves contentious issue on PEI

"There is no way the average person that mortgages his home and puts their life savings on the line … if a dispute should arise they do not stand a chance against the multi-national corporation and their cadre of lawyers,'' Dumville said.

The Guardian
October 26, 2001

Proposed franchise legislation proves contentious issue on PEI
Some business owners say law would stop franchises from coming here while others argue it would allow hearings in P.E.I. Courts
Dave Stewart

Allan MacPhee, franchisee with IGA in Souris, brought a prop with him to standing committee hearings in Charlottetown Thursday on proposed franchise legislation. MacPhee used the prop, a sleigh which his father used to deliver groceries from the family business years ago, to drive the point home that legislation is needed to protect small business owners from the rich multi-national corporations that own the franchises.

Tim Banks, the franchisee for Home Hardware in Stratford, says if the province enacts legislation governing franchise operations, Prince Edward Island will become the laughingstock of Canada.

Debbie Tanton, a children's store franchisee who had a fallout with her parent company a few years ago, says the province must go through with legislation to prevent big multi-national corporations from running roughshod over small local business owners.

That, in a nutshell, describes the two modes of thinking as a number of presenters went before the Standing Committee of the Provincial Department of Community Affairs and Economic Development in
Charlottetown Thursday.

"I can't believe we're even talking about this,'' Banks told the committee.

"This will stop franchises from coming to the Island and will (kill) jobs. That's my opinion.''

Business owners such as Tanton held a different view. She used to operate a children's store called Once
Upon A Child on Allen Street in Charlottetown.

But she ran into major problems with her franchisor, Grow Biz International from Minneapolis, Minn., and became mired in debt into the thousands of dollars when the matter went to court and Grow Biz brought out its cadre of lawyers.

Tanton now runs her children's business independently, called Children's Exchange.

Tanton, and other presenters, made the point that when franchisees get into a dispute with the franchisors, rather than hearing the matter in a P.E.I. courtroom, it gets fought out where the company's head office is.

In Tanton's case, that was in Minneapolis.

Tanton said it cost her upwards of $13,000 to travel to Minneapolis, find a place to stay and hire a lawyer, a cost not many small business owners can afford.

Essentially, proposed provincial legislation would call for full disclosure in any franchise agreement, minimum standards of fair dealing between franchisors and franchisees and a dispute remedy that is efficient, effective and Island-made.

Those who support the legislation say it would give them more clout when dealing with their corporate head offices.

Currently, P.E.I. has no laws governing the relationship between the two parties. Alberta and Ontario have addressed the issue with Ontario bringing in full disclosure, which is meant to ensure that potential franchisees receive information prior to entering a franchise agreement.

Bush Dumville, who owns the Burger King franchise on the Island, said although his relationship with his franchisor has been good it isn't the case for everyone.

"There is no way the average person that mortgages his home and puts their life savings on the line … if a dispute should arise they do not stand a chance against the multi-national corporation and their cadre of lawyers,'' Dumville said.

Alan MacPhee, a franchisee with IGA in Souris, said his problems started once Sobey's and Loblaws bought the grocery franchise.

"We were successful as an IGA franchise for 20 years and then it changed all of a sudden,'' MacPhee said.

He explained that everything from renovations to Loblaws raising the franchise fee 20 per cent put his business in jeopardy.

While those opposed to legislation at the hearings said the onus is on both sides to make sure everything necessary is laid out in the original contract, MacPhee countered by saying legislation is needed to make sure franchisors can't change the original contract on a whim.

Richard Cunningham, president and CEO of the Canadian Franchise Association, said legislation would create extra costs and unnecessary administrative burdens that benefit neither party and would make P.E.I. less attractive to expanding franchise businesses who look at P.E.I. and see a lot of extra red tape.

Even lawyers who presented at the hearing Thursday disagreed.

David Sterns, an Ontario lawyer who has represented disgruntled franchisors, said a franchise industry without legislation is akin to a country without a constitution.

He called on the committee to recommend that all arbitration cases between franchisors and franchisees be held on P.E.I. where business owners can better afford to defend themselves rather than wherever their head office happens to be located.

"Franchisees (in Toronto) have literally been marching in the streets fighting for some form of legislation,''
Sterns said.

Mark Ledwell, a Charlottetown lawyer who said he has argued on behalf of both parties, said legislation would reduce P.E.I. to a "regulatory minefield'' and make the province much less attractive to business.

Michael Grinner, president of Grinner's Food Systems Ltd., which owns the Greco Pizza franchise, said a healthy communication between the two parties is the answer and that legislation is only an absolute last resort.

"If legislation must be drawn up it must focus on pre-sale disclosure (only),'' Grinner said.

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