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Franchisors are greedy and self-interested. Franchisees
are lazy and careless. These are the common refrains of
franchisors and franchisees as their relationships start to break
down. Franchising can be a tremendous partnership between
business owners, but can sometimes lead to disastrous results, and
even litigation.
Franchise law exists in various Canadian provinces because of a
recognition by legislators that, in the franchise relationship,
franchisors have a disproportionately larger amount of bargaining
power and control in operations. As a result, franchisees are
given certain statutory rights in an effort to protect "the
little guy" from being taken advantage of when they are making
a significant investment.
Unfortunately, it happens far too often that, despite these
rules and regulations, franchisors do manage to exploit the weaker
party and charge oppressive fees and impose overbearing
controls. Likewise, a staggering number of franchisees seem
somewhat content to flagrantly violate system standards and neglect
making required payments when they grow unhappy with their
franchisor.
As a legal advisor to both franchisors and franchisees, I
have no dog in this fight, so I do try to counsel my clients about
the importance of open communication and consultation.
Franchisees have come to expect this from their franchisors, but it
is a two-way street and it is critical that issues are addressed
between the parties as they arise.
In a recent court decision involving Tim Hortons, the
Ontario Court of Appeal decided in favour of the franchisor, in
part, because of its efforts at maintaining frequent and open
communication with franchisees regarding system changes, such as
new methods for delivering services and product purchase
requirements.
As the introduction of system changes, and the associated
increased costs to franchisees, are a frequent source of friction
between franchisors and franchisees, this level of consultation
serves as a high standard for franchise parties to aspire to.
On the other side, I have found that franchisees who perform their
obligations in good faith and comply with their franchise
agreements will find supportive partners at the other side of the
bargaining table when they seek to raise difficult issues with
franchisors.
In maintaining solid and prosperous franchise
relationships, the importance of good, honest and frequent
communication cannot be overstated.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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