MPPs seek anti-swindling law for franchises

Ontario first set out the rights of franchisees and the information franchisors must provide in a private member’s bill called the Arthur Wishart Act (Franchise Disclosure), 2000. A lack of disclosure became sufficient grounds for a franchisee to demand a refund. Now Liberal MPP Helena Jaczek (Oak Ridges-Markham), New Democrat Cheri Di Novo (Parkdale-High Park) and Conservative Norm Miller (Parry Sound-Muskoka) want more information to be provided.

The Toronto Star
September 15, 2010

MPPs seek anti-swindling law for franchises
James Daw

James_Daw_Toronto_Star.jpeg

Members of three political parties in the Ontario legislature want more information given to prospective franchisees to reduce their chances of being swindled.

They have joined forces to propose that Ontario require franchisors to educate prospective investors on how to evaluate themselves and the business opportunity being proposed.

The Canadian Franchise Association, which represents the top franchise networks in the country, has yet to evaluate the change in legislation proposed Wednesday at Queen’s Park.

But President Lorraine McLachlan questions why legitimate franchisors would be singled out to educate and inform investors more than any non-franchisor would have to do.

Meanwhile, a woman who lost money to a franchisor who had previously failed to refund deposits until faced with fraud charges, is disappointed not to see new criminal sanctions being proposed.

“I don’t think it (will make) any real difference in cases like (Reza/Anthony) Solhi,” says Nidhi Malik, whose family had paid to get a new franchise called Anthony’s Kitchen.

They had handed over money before reading a 2006 Toronto Star story about the harsh words various judges have used to describe the small-time pizza and restaurant chain franchisor in the past.

Ontario first set out the rights of franchisees and the information franchisors must provide in a private member’s bill called the Arthur Wishart Act (Franchise Disclosure), 2000.

A lack of disclosure became sufficient grounds for a franchisee to demand a refund.

Now Liberal MPP Helena Jaczek (Oak Ridges-Markham), New Democrat Cheri Di Novo (Parkdale-High Park) and Conservative Norm Miller (Parry Sound-Muskoka) want more information to be provided.

They want an education document handed to franchisees that would:

• Urge them to consider whether they have enough capital, management skills and awareness of the workload, and whether they have considered alternative types of business.

• Set out issues they should consider, like the franchisor’s track record, financial stability, officers, innovations, training program and information about other franchisees.

• Highlight potential issues with regard to the goods and services the franchisors will provide or require the franchisee to buy, such as the price, uniqueness, guarantees, market demand and availability of alternatives.

• A primer on how to ask about the geographic territory where the franchisee may operate, whether any others may also, and how to find out who they are.

• Advice to consult a lawyer and accountant about the entire agreement, plus two dozen things to learn about the requirements imposed on franchisees, and 13 questions to ask other franchisees.

These are all things that a lawyer specializing in franchise law would know to advise a client, but a lawyer who dabbles in the field or does a quick review might not.

Unfortunately, inexperienced franchisees are often reluctant to incur the expense of a thorough review before they invest, and are satisfied with a warm smile and handshake.

McLachlan says full disclosure is a requirement for membership in the Canadian Franchise Association, even in provinces without franchise disclosure law.

But not all franchisors belong to the association. Not all province are like Ontario, Alberta, Prince Edward, New Brunswick and Manitoba in requiring disclosure. And no government body verifies the disclosure provided.

All the small minority of franchisees who feel duped can do is hire a lawyer, sue in court, then chase the franchisor or its executives to collect if they win and award. Police will often refuse to investigate business disputes.

The proposed amendments to Ontario legislation are to be debated Sept. 23 prior to a vote on whether to give the bill second reading.

ac.ratseht|wadj#ac.ratseht|wadj

http://www.thestar.com/article/861850--daw-mpps-want-franchisors-to-school-investors


Brought to you by WikidFranchise.org

Risks: Arthur Wishart Act (Franchise Disclosure), 2000, Canada, Canadian Franchise Association, CFA, Criminal charges, Current franchisees can’t talk freely, Deposit money not refunded, Fraud, Must buy only through franchisor (tied buying), No justice in legal system, Tied contracting, Outright scam, Police can’t/won't investigate losses less than $250,000, Private Members’ Bill, Rescission, Talk to former franchisees, Canada, 20100915 Mpps seek

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License