Lawsuit in store for company

Suddenly, on the third day, two police officers arrived. They stood by as Grand & Toy managers told the franchisees that their contracts were being terminated and their stores taken away, according to court documents filed by the owner-operators of 23 of the affected Ontario franchise stores.??

Kingston Whig-Standard
November 1, 2001

Lawsuit in store for company
Frank Armstrong

Grand%20%26%20Toy%20franchising.jpg

Storeowner Bruce Erler says it was like seeing light at the end of the tunnel - "and they blow the tunnel up."

In June, the owner of the Grand & Toy store on Princess Street attended what he thought would be a routine corporate meeting in Muskoka.

Erler had been recognized for years as one of the office supplier's top store operators. This year would be no exception - he was ranked No. 3 in Canada during an upbeat awards gala on the second day of the retreat.

Suddenly, on the third day, two police officers arrived. They stood by as Grand & Toy managers told the franchisees that their contracts were being terminated and their stores taken away, according to court documents filed by the owner-operators of 23 of the affected Ontario franchise stores.

"As of Dec. 31 they are buying our inventory and we are out on the street," Erler told The Whig-Standard yesterday.

He and other owner-operators are seeking $24 million in damages from Grand & Toy for what they claim is breach of duty, breach of contract, negligence, negligent misrepresentation and breach of fiduciary duty, plus $5 million in punitive, aggravated and exemplary damages.

Alternatively, they want $12 million in damages for wrongful dismissal plus $5 million in punitive damages.

They also want a court order preventing the termination of their licence agreements, a declaration that such a termination would be improper, and legal costs, says their statement of claim against Grand & Toy Ltd., filed in July at the Ontario Superior Court of Justice.

The court document also says the franchisees weren't offered compensation for giving up their stores and would be responsible for compensating laid-off employees.

For Erler, the news was devastating.

He had bought the licence for the Princess Street store in 1993 after being laid off from a 25-year management job in construction equipment rental.

He said he continually renovated the store, almost doubled his workforce and kept sales up despite competition from the new Staples big-box store downtown.

This summer, he joined the other owner- operators under the umbrella of the Grand & Toy Licensee Association to press the company for better compensation.

Although the case is before the courts, Brian Ward, Grand & Toy vice-president of retail, agreed to speak to The Whig.

Ward said he warned licensees more than a year ago that their contracts would end at the end of this year. About one-third of the chain's stores are run by licensees; the rest are corporately owned.

He also pointed out that owner-operators have had to invest very little in their stores.

"Our licensees invested a maximum of $5,000 - most invested nothing," Ward said last night from Toronto.

"There was no cash involved at all. Grand & Toy holds the head lease and Grand & Toy has built the stores, owns the leasehold improvements, owns the furniture and fixtures and has, of course, spent tens of millions of dollars over the years building up the brand."

Owner-operators, he said, only pay for the inventory, which Grand & Toy will be buying back from them.

In 1993 and 1994, the chain wanted to boost the performance of its stores so it invited people to run several stores privately. Licences cost $5,000 but a number of applicants couldn't afford the fee, so it was waived, said Ward.

Grand & Toy also paid for all renovations to the stores, he said.

Over the years, the company has boosted the performance of its corporate stores and there's no longer a need for licensees, he said.

Licensees have been offered compensation, he added.

"I specifically indicated to all the licensees in mid-June … that we would have a number of corporate positions available," he said.

These included store management and contract work.

About 95 per cent of all staff at the licensee stores have been rehired for the corporate stores, which will remain open.

"No stores are closing," Ward said.


Brought to you by WikidFranchise.org

Risks: Converted managers into franchisees, Lawsuit, group, Arthur Wishart Act (Franchise Disclosure), 2000, Canada, Expropriation without compensation, Refusal to renew contract, Police intervention, Bad faith and unfair dealings, Award-winning franchisees, Franchisee association, independent, Canada, 20011101 Lawsuit in

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