Media Backgrounder

On June 13, 2001, G&T unilaterally announced they would not be renewing franchise agreements and would be taking back the franchised stores on Dec 31, 2001. No compensation has ever been offered.

Canadian Alliance of Franchise Operators
November 6, 2001

Media Backgrounder

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Backgrounder

Grand & Toy Limited

Grand & Toy Limited (G&T) is a division of an Idaho-based multinational called Boise Cascade and they have consolidated annual revenue of $7.8 billion. G&T controls 75 retail outlets across Canada with 26 stores are run as franchises in Ontario.

The Grand & Toy Licensee Association (GTLA) is an independent franchisee association and represents the interest of almost 90 per cent of these small business investors. The GTLA has joined the Canadian Alliance of Franchise Operators (CAFO).

Ontario’s new franchise law, the Arthur Wishart Act (Franchise Disclosure), 2000 became fully active in January 2001. This law requires franchisors to disclose certain criminal and financial information to their franchisees, ensures franchisee association members will not be intimidated and all parties must deal with each other in good faith, fair dealings to a commercially reasonable standard.

Issues
On June 13, 2001, G&T unilaterally announced they would not be renewing franchise agreements and would be taking back the franchised stores on Dec 31, 2001. No compensation has ever been offered.

The reason given to the franchisees was G&T’s refusal to provide disclosure information as mandated by the Wishart Act. No perfomance-based criteria have ever been given. G&T had offered contracts in 1993, 1994 and 1998.

During the time that the stores were franchised, their sales increased by 88.0% and staff employment increased by 26.2%. Over 300 staff are in process of re-applying for their jobs.

Further, Grand & Toy Limited:

  • is trying to “gag” the GTLA through several threats, 2 of them in writing. Osler, Hoskin & Harcourt, G&T’s law firm, stated that the franchisees and each member would be sued should this dispute be brought into the public either via the media or politics,
  • is attempting to break the GTLA as it exercises its legitimate activities as an independent franchisee association. Required editing privileges over GTLA executive and general meetings minutes and threatened personal liability if not allowed to do so (illegal under Wishart Act),
  • is attempting to interfere with the GTLA and CAFO relationship (lawsuit threats),
  • refuses to waive the 1-year, 2-kilometre, post-term, non-compete clause in the existing franchise contract (in many communities, this effectively means a 20-year office supply manager is unemployable in their industry),
  • is holding the franchisees responsible for all staff exit costs,
  • repeatedly assured franchisees that G&T was interested in a long-term relationship thus causing the franchisees to continue to invest in their stores (G&T Commitment Letter to franchise program available upon request),
  • renewed contracts, albeit successively more onerous ones, in 1994 and 1998,
  • is “cherry picking” the GTLA inventory and unilaterally deciding what they will buy,
  • continues to appropriate GTLA commercial accounts without compensation,
  • offered new franchised stores as late as March 2001,
  • insisted a waiver of legal rights be signed if franchisee wanted to stay past Dec 31, 2001,
  • stated that it was G&T’s policy not to accept as new franchisees any “unacceptable ethnics”,
  • refuses to negotiate with the GTLA for any compensation for the significant value of their members’ businesses ( goodwill, sales increases, franchise fees, renovations, inventory, fixtures, leasehold improvements, other assets) and
  • has chosen to provoke a lawsuit and intentionally delay the legal process, even in the face of a very negative (for Grand & Toy) mediation finding.

The Arthur Wishart Act (Franchise Disclosure), 2000 was intended to protect franchisees, not provide justification for their abuse and abandonment by predatory foreign corporations. The Ministry of Consumer and Business Services estimated in 1998 that the number of lawsuits started each year in the franchise industry was 5,000.

Action
GTLA has joined with the Canadian Alliance of Franchise Operators in asking for the following action:

  • strengthen the Wishart Act so that future franchisee-investors don’t have to suffer this form of expropriation without compensation. The Legislative Assembly of Prince Edward Island is considering an appropriate franchise law,
  • our elected Ontario officials need to support their 40,000 entrepreneurs by convincing Grand & Toy to enter into good faith negotiations with the GTLA,
  • inform the Canadian public of Grand & Toy’s attitude toward their small business investor partners and
  • review municipal, provincial and federal government office supplies purchasing programs.

Contact Information

Mr. Peter Vanexan
President
Grand & Toy Limited
416-391-8581 tel
www.grandandtoy.com

Mr. Les Stewart
President and Founder
Canadian Alliance of Franchise Operators
705-737-4635 tel
www.cafo.net, ten.ofac|trawetsl#ten.ofac|trawetsl

GTLA Statement of Claim, Commitment Letter and threatening letters available upon request.


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Risks: Expropriation without compensation, Refusal to renew contract, Arthur Wishart Act (Franchise Disclosure), 2000, Canada, Threats of lawsuits, Can’t talk to media, Can’t talk to member of parliament, Right to associate and right to harass, Waiver of legal rights, Right to associate but refuses to acknowledge, Bad faith and unfair dealings, Canada, 20011106 G&T Backgrounder

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