A&P buys out 29 Food Basics

Franchisees had claimed that A&P altered the terms of their original agreements in a way that was driving down profits at the Food Basics stores. The dispute was scheduled to go to trial this month.

The Toronto Star
October 2, 2004

A&P buys out 29 Food Basics
$40 million deal needs court okay. ‘Ordeal’ is over, franchisees say.
Dana Flavelle

Ontario's second-largest supermarket chain has reached a $40 million out-of-court settlement with its franchisees over breach of contract allegations.

A&P Canada's parent company said about half the money is being used to buy out the 29 Food Basics franchisees who opted into the class-action lawsuit. Another 40 current and former franchisees didn't participate.

The settlement is unusual both in size and the fact it has been made public, according to Ned Levitt, a lawyer and director of the Canadian Franchise Association.

As a publicly traded company, however, the parent company, Great Atlantic & Pacific Tea Co., would be required to disclose the amount because it will become a charge against earnings in the current quarter.

Great Atlantic's share price rose 3 cents (U.S.) to $6.13 on the New York Stock Exchange as the uncertainty over the outcome of the dispute was lifted.

"The resolution of this matter enables us to continue growing our strong discount business in Ontario with a larger complement of corporately-owned stores, while at the same time strengthening our continuing franchise stores," said Christian Haub, chairman, president and chief executive officer of the Montvale, N.J.-based company.

No additional details of the settlement were available yesterday. It goes before Justice Warren Winkler, of the Ontario Superior Court of Justice, for approval Monday, said lawyer John Sotos, whose firm Sotos Associates LLP, of Toronto, represented the franchisees.

Brantford-based franchisee Lorne Petterson, who is among those being bought out, said he was relieved that "the ordeal" is over.

"It's been 2 1/2 years. It's been a long haul. Too many sleepless nights," he said in a telephone interview yesterday.

Petterson said he planned to take a few months off and then look for a new business opportunity, "not necessarily in food," he added.

A&P dropped its countersuit against the franchisees.

Franchisees had claimed that A&P altered the terms of their original agreements in a way that was driving down profits at the Food Basics stores.

The dispute was scheduled to go to trial this month.

A&P blamed the lower profits on increased competition in the food industry and said it had tried to prop up struggling franchisees through subsidies.

The Food Basics franchise accounts for a third of A&P's sales in Canada and half its profits.


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Risks: Breach of contract, Lawsuits, class-action, Canadian Franchise Association, CFA, Don’t owe your lawyer money, Canada, 20041002 A&P buys

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