DAVID & GOLIATH

Kind of makes you wonder who you work for in these situations, yourself or the franchisor? So much for self-employment enjoyment.

The National Post
February 6, 2008

DAVID V. GOLIATH
Jim Middlemiss

Law reports are awash with fights between franchisors and franchisees, usually in the context of pizzas. It's not often you see Canadian icon Tim Horton's in a lawsuit with an unhappy franchise owner. Starting Monday, TDL Group Ltd., which owns the coffee-and-donut empire, is scheduled to be in a Winnipeg court litigating with the former owners of two of its franchises.

The company sued the Zaborniak family for $130,000 for failing to pay monies owed under two franchise agreements. The cases date back to the mid-'90s, however, so the interest and penalties mean it's closer to $900,000.

According to court documents, the Zaborniaks' invested $290,000 into their main franchise, at 1060 Henderson Highway, but it wasn't successful, so they claim TDL encouraged them to obtain another, which they did, again without success.

In a counterclaim, they allege negligent misrepresentations and bad faith in the negotiations back in 1998, claiming a "lack of candor as to the general financial performance of Tim Horton shops in the Winnipeg area." None of the allegations have been proven in a court of law.

TDL declined to comment on the suit. Gene Zazelenchuk, counsel for the plaintiffs, said, "We allege they didn't act in good faith." Among the allegations are claims that TDL entered into a secret deal for a third store with one of the family brothers without telling the rest of the family about it. Nasty stuff, which should make for interesting litigation, but not so good for family values.

What the litigation does reveal is just how onerous franchise agreements are. The franchisor makes no representations or warranties about the financial details it discloses. There are also enough fees to make you wonder why anyone would want to buy a franchise, which is typical of the franchising industry, whether it's pizza, donuts or Chinese food. There are fees for licensing the name, fees for marketing and advertising, late charges and a cut of gross sales. Kind of makes you wonder who you work for in these situations, yourself or the franchisor? So much for self-employment enjoyment. You might do better owning stock in the company franchising stores than an actual franchise.

http://www.financialpost.com/scripts/story.html?id=c43c970b-5aa9-477e-908a-de5cde9fb1bb&k=30050#ixzz0ZbvUH3ML


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