Letters To The Editor: Nov. 1998

To the Editor: It is my experience that the financial and personal risks associated with franchising are seriously understated in the June article, “Lawn & Landscape Takes a Look at Franchising.” As someone who operated a lawn care franchise for 4½ year and now operates an independent lawn care firm, I caution any independent lawn care operator about franchising.

Franchising creates long-term, far reaching legal obligations on the part of the franchisee. Although there is protective legislation in 38 states, this relationship is enforced through complex documents called franchise agreements that often result in lawsuits when disputes arise during the contract.

If you are seriously considering a franchise, contractors should get specialized, unbiased, franchising-specific, legal advice. I have found the American Franchisee Association, which has monitored the franchise industry for 30 years, to be of great practical assistance (312/431-0545).

How common are the problems? One indication is the level of litigation in all industries that offer franchises. The Ontario government recently stated that 5,000 lawsuits were started in 1997 that involved franchising. With only 40,000 franchisees in operations, that means more than 12 percent of all Ontario franchises are involved in new litigation.

Legal problems in franchising are well documented. Contractors interested in franchising should protect themselves and their families by: taking their time; talking to many existing and former system franchisees and getting advice from associations that monitor franchising from a franchisee/investor viewpoint. Like most things in life, if it seems to good to be true it normally is.

Les Stewart
founder
Canadian Association of
Franchise Operators

However, his assertion that franchising is a predatory practice fraught with lawsuits is not just a jaundiced view of the concept, but one that tarnishes the reputations of the hundreds of thousands of honest business owners – franchisees and franchisors – who successfully employ this strategy as partners.

Mr. Stewart’s claims that more than 5,000 lawsuits involving franchises were started in Ontario in 1997 alone is unsubstantiated.

Attorneys of leading Canadian franchise lawn firms expressed doubts. Frank Zaid, senior partner of Osler Hoskin & Harcourt of Toronto, said, “Based on our experience, I can’t see how there would be that number of lawsuits.” Alex Konigsberg, partner at the Montreal firm Lapointe Rosenstein said the claim “bears no relationship to reality.”

In the U.S., at least, all one needs to do is read the Uniform Franchise Offering Circular to determine if a particular company is lawsuit-prone.

I urge those eager to enter franchising to do due diligence in their choice of associations as well. If one seeks unbiased, balanced and comprehensive information about franchising, avoid any organization specifically representing one side or the other.

The "franchisee-only" association Mr. Stewart recommended represents only one side of the franchise partnership and promotes increased government intervention in franchising, which inevitably leads to more red tape and taxes for owners.

Perhaps it was the International Franchise Association (202/628-8000) that Mr. Stewart had in mind when he suggested an organization that has a long history of advocating fairness in franchising. IFA is nearly 40 years old, but more importantly, represents both franchisees and franchisors. Plus, IFA’s members abide by its stringent Code of Principles and Standards of Conduct, a set of guidelines promoting third-party mediation instead of lawsuits.

Buyer beware, Mr. Stewart? Yes, and seller beware as well. That’s why the contract they sign is called an agreement.

Russell J. Frith,
President
Lawn Doctor, Inc.