Committee Report, Legislative Assembly of Prince Edward Island, Canada

Having considered presentations received, your Committee is of the opinion that the draft legislation as prepared by “Islanders for Fair Franchise Law” does not form a good base from which to devise franchise legislation for this Province.

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Committee Report
November 27, 2001

The Legislative Assembly of Prince Edward Island
Standing Committee on Community Affairs and Economic Development
Ms. Beth MacKenzie, MLA

Standing Committee on Community Affairs and Economic Development
The Legislative Assembly of Prince Edward Island
November 27, 2001

Prince Edward Island
Legislative Assembly

Office of the Clerk
P. O. Box 2000
Charlottetown, P.E.I. C1A 7N8
Tel: (902) 368-5970
Fax: (902) 368-5175

Draft Franchise Legislation

27 November, 2001

Madam Speaker and Members of the Legislative Assembly,

Introduction

During the Second Session of the 61st General Assembly, Andy Mooney, MLA for the District of Souris-Elmira tabled for the consideration of all Members of the House draft franchise legislation (attached as Appendix “A”) as prepared by an organization called “Islanders for Fair Franchise Law”. This draft legislation was not presented to the House as a private members bill pursuant to the Rules of the Legislative Assembly of Prince Edward Island but rather, tabled by Mr. Mooney for discussion purposes. Subsequent to the tabling of the draft legislation, the Legislative Assembly then duly considered and carried the following motion;

Andy Mooney, MLA moved, seconded by Cletus Dunn, MLS, the following Motion:

Be it resolved:

1 that draft franchise legislation for Prince Edward Island, as tabled in this House on 10 May 2001, be referred to the Standing Committee on Community Affairs and Economic Development;

2. that said Standing Committee be authorized by this House to meet between the Second and Third Sessions of this General Assembly to review the draft franchise legislation; and

3. that said Standing Committee make report to this House, with recommendations, within ten sitting days of the commencement of the Third Session of this General Assembly.

Permanent Members of the Standing Committee on Community Affairs and Economic Development are as follows:

Beth MacKenzie, MLA, Chair Wilfred Arsenault, MLA
Hon. Mitch Murphy, MLA Hon. Ron MacKinley, MLA
Hon. Chester Gillan, MLA

Your Committee would also like to extend special appreciation to Mr. Wes MacAleer, MLA (Charlottetown-Spring Park) for his special interest and contribution to the work of the Committee. He served as a replacement at several meetings held by the Committee and his insight was helpful in assisting the Committee in reaching the conclusions and recommendations contained herein.

Further, your Committee was assisted in its work by Mr. Edison Shea of the Office of the Attorney General. Your Committee wishes to sincerely thank Mr. Shea for his time and diligence in ensuring that the Committee was in the best position possible to make an informed decision on this matter.

Public Hearings
In meeting to determine how to discharge the responsibilities as directed by the Legislative Assembly, your Committee agreed to invite opinion from individuals and organizations who may be interested in making their views known on this matter. Accordingly, your Committee inserted an advertisement in Island newspapers (see Appendix B):

Response was received from many different and interested Provincial, Regional and National organizations as well as from numerous individuals. Public Hearings were scheduled and presentations received on 25 October, 2001 from the following organizations and individuals;

Bush Dunville
Alan MacPhee
Debbie Tanton
Ontario Franchisee Coalition
Jim Watt
Pharmasave Group
Canadian Franchise Association
Grinner’s Food Systems Ltd.
Tim Banks
Edward Levitt
Tim Hortons
Islanders for Fair Franchise Law

In addition, your Committee received written opinions from the following:

Canadian Federation of Independent Grocers
John Ives
Donald Deacon

Your Committee would like to sincerely thank all interviewers for providing the Committee with the benefit of their views. Without this input, the Committee’s task would have been much more difficult indeed.

Background
The draft legislation states its purpose as follows;

  • to require franchisors to disclose information about the franchise, the franchisor and its associates and the intended franchise relationship so that prospective franchisees can make informed investment decisions;
  • to establish minimum standards for fair dealing between franchsiors and their associates and franchisees throughout franchise relationships; and
  • to provide a remedy so that disputes between franchisors or their associates and franchisees can be dealt with efficiently and effectively.

Two provinces in Canada presently have “franchise legislation” in force, these being Alberta and Ontario, yet the draft legislation as introduced in the Legislative Assembly of Prince Edward Island bears little resemblance to either of these statutes. As a result, there was little practical Canadian experience to draw from in assessing the performance or merits of franchise legislation in this form.

Your Committee, during the public hearing process, received considerable divergence of opinion with respect to the advisability of enacting this draft in its present form. On the one side, your Committee heard of unscrupulous franchisors preying on unsuspecting, ill advised or legally compromised franchisee or prospective franchisees with little negotiating leverage within franchise agreements. All of this while the franchisee assumes most of the risk. On the other side, we heard from some presenters that the enactment of legislation in this form would be ill advised and, even worse, could result in a burdensome regulatory regime with government becoming unnecessarily involved in private business relationships. It was also purported by some presenters that the enactment of this legislation would leave potential franchisees and franchisors seriously considering whether or not establishing on Prince Edward Island makes good and sound business sense. Your Committee suspects the real situation lies somewhere in between these two polarized viewpoints.

Recommendation
Having considered presentations received, your Committee is of the opinion that the draft legislation as prepared by “Islanders for Fair Franchise Law” does not form a good base from which to devise franchise legislation for this Province. Having stated this, your Committee is of the opinion that legitimate concerns were expressed to your Committee during the conduct of hearings that are worthy of further consideration and may well indicate a need for franchise legislation, in some form, in this Province. Your Committee does not feel that all franchisees and franchisors in the Province were comfortable in coming before a legislative committee in a public forum and openly articulating their views on this subject. As a result, we do not feel that we have the benefit of all the information required to make the best decision possible on the advisability or form of franchise law. Accordingly, your Committee recommends that the Office of the Attorney General proceed with preparing a draft legislative proposal using, but not limited to, the utilization of the Ontario and Alberta legislation as a reference document. In preparing the draft proposal, your Committee urges that the Office of the Attorney General be mindful that:

  • the draft should be based on disclosure such that franchisors must be required to disclose to prospective franchisees sufficient detail to ensure that franchisees have the information necessary to make informed business decisions.
  • uniformity – the draft should be as consistent as possible with other Canadian jurisdictions to ensure that franchisors are not confronted with a different set of rules in each Province in which they wish to establish a business. Cost of establishing and conducting business in a Province is one of the most considerations for any prospective business. With a population of only 140,000 people, P.E.I. must be careful not to send the message that it is a difficult place to do business. We must encourage business to establish here and foster a positive business climate. In so doing, however, it is important that protection for prospective franchisees from unscrupulous franchisors be considered.

Your Committee acknowledges that the vast majority of franchisors and franchisees are upstanding and conscientious contributors to Prince Edward Island’s social and economic well being, however; there are always some exceptions to every rule and legislators must strive to strike an appropriate balance in this regard.

Your Committee recognizes that this recommendation will not be realized in the very short term. Conversely, your Committee is of the opinion that legislation that envisages the insertion of government in private business arrangements through legislative and/or other means must necessarily be proceeded with cautiously. Again, your Committee does not dismiss the necessity of legislation (in some form) to cover disclosure essentials of business relationships between franchisors and franchisees. It is for this reason that your Committee is recommending that the Office of the Attorney General proceed with the drafting of a bill that will serve to equitably address the concerns as expressed by both franchisors and franchisees.

Respectfully submitted.

Ms. Beth MacKenzie, MLA
Chair, Standing Committee on Community Affairs
& Economic Developmen


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