InDUsTRY spOTLIgHT
KEEPING fraNCHISEES
IN tHE LOOP
The franchisor/franchisee relationship has always been a
unique, and sometimes tricky, one to navigate. A strong
communication plan just might be a franchisor's best
defense.
By Vanessa Chris
If the Ontario Superior
Court's Feb. 24 ruling of Fairview
Donut Inc. v. The TDL Group Corp.
taught us one thing, it's that good communication counts.
In the class action, Tim Hortons'
franchisees claimed it breached their
franchise agreement and its duty of
good faith and fair dealing by switching from fresh-baked goods to "Always
Fresh" partially pre-baked goods. It also
required them to introduce a lunch
menu, which they claim increased their
costs and forced them to sell the products at a loss.
There have been many cases where
the franchisees had a leg to stand on
because the franchisor made major
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business decisions without a paper trail
proving it considered the franchisees'
interests. This wasn't one of those cases.
It's clear that Tim Hortons' communication strategy is one other franchisors
can learn from.
"The franchisor engaged in extensive discussion and communication
with its franchisees before the Always
Fresh conversion and the change was
supported by the majority of franchisees," Justice J. Strathy said in his
summary judgement. "The franchisor
informed the franchisees that the cost
of raw materials would increase under
Always Fresh, but that this would be
offset by labour savings and other savings and conveniences. The experience
INHOUSE
of the franchisees over time has confirmed this assertion."
Although the plaintiffs appealed
Strathy's decision, the Court of Appeal
upheld it in December, dismissing the
appeal entirely.
Until this case, franchise legislation
— which has evolved over the past
decade in Alberta, Ontario, Manitoba,
New Brunswick, and PEI — has
appeared to be fairly one-sided. After
years of franchisors having the upper
hand, the new legislation was partly
designed to even the playing field.
"Because the franchisor/franchisee
relationship is such a close one, and
it's one in which the franchisor exerts
such strong control of all aspects of
