Letter from Great Canadian Bagel to franchisee

Let us be totally candid. Your client is well aware that her future as a Great Canadian Bagel Franchisee is in serious jeopardy. Accordingly, her motives for calling this meeting at this point in time are highly suspect. If we are correct in our assumptions, her planned activities will leave the Franchisor with little choice but to consider future dealings with your client as totally adversarial.

Letter from Great Canadian Bagel to franchisee

The Great Canadian Bagel, Ltd.
December 17, 2001

Letter to Franchisee’s Lawyer

The Great Canadian Bagel, Ltd.
1270 Central Parkway West, Suite 301
Mississauga, Ontario
L5C 4P4
Phone: (905) 566-1903
Fax: (905) 566-1402
Member: Canadian Franchise Association

BY FACSIMILE ONLY TO: (416) 863-0305

December 17, 2001

Torkin Manes Cohen Arbus
151 Yonge Street, Suite 1500
Toronto, ON
M5C 2W7

Attention: S. Fay Sulley

Dear Sirs:

Re: Franchise Agreement, 4242 Dundas Street East, Etobicoke

Receipt of your letter of December 14, 2001 is hereby acknowledged.

On December 13, 2001, Theresa Slater-Smith and spouse met with Brian Leon, Ed Kwiatkowski and Bill Manzara at these offices. I am advised that negotiations failed as your client would not provide any proposal to resolve her substantial indebtedness beyond suggesting that the store either be sold or de-identified and retained by her as an independent operation. She was told that while she was always free to sell the store the other alternative (of de-identification) would have to be considered.

My letter of November 28, 2001 was not a Notice of Termination, but rather a Notice of Default. Your client was to pay the amount outstanding by 12:00 noon on December 14, 2001. No monies were delivered by that deadline. The franchisor is now in a position to terminate the Franchise Agreement which, if done, will be accomplished by the service of Notice of Termination. Accordingly, your preconditions for opting into arbitration have not been met.

The Franchisor has further grounds for termination which, pursuant to Section 16(j) of the Franchise Agreement, do not require any notice prior to termination. Prior to the aforesaid meeting, your client provided financial statements which, when compared with the Franchisor’s records of sales reported by the Franchisee, revealed a substantial under reporting in sales of approximately $145,392 since 1996. I am attaching a copy of Bill Manzara’s Memorandum to Ed Kwiatkowski in this regard. Accordingly additional royalties and cooperative marketing fund contributions are owing in the amount of $10,904.40 plus GST (before interest). This letter shall gratuitously serve as notice to your client of said default.

We have grounds for yet a further default. It is our information, based upon unsolicited telephone calls received from other curious Franchisees, that your client, a defaulting disgruntled franchisee, has organized a meeting of Toronto area Franchisees for 7:00 p.m. tonight at her premises. We have reason to believe that there are forces at work spearheaded by your client with the intent of undermining the Franchisor’s system, reputation and goodwill among its other Franchisees. Given her current status with the Franchisor, we do not believe that your client has any intention of bringing together these franchisees for any good faith productive purpose or for purposes of organization as permitted under the Arthur Wishart Act (Franchise Disclosure), 2000. If your client carries out her plan, the Franchisor may incur substantial damages and she will be held accountable therefore to the fullest extent permitted by law.

Let us be totally candid. Your client is well aware that her future as a Great Canadian Bagel Franchisee is in serious jeopardy. Accordingly, her motives for calling this meeting at this point in time are highly suspect. If we are correct in our assumptions, her planned activities will leave the Franchisor with little choice but to consider future dealings with your client as totally adversarial. We would hope that you discuss this issue with your client as soon as possible so that she may reconsider her plans.

Yours very trully,

Kenneth S. Launon
Legal Counsel

cc: Brian Leon
Ed Kiatkowski
Bill Manzara


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