The president of a group of disgruntled Quiznos franchisees says the fast-food chain has been granted a court injunction, forcing him to close his three Oakville-area restaurants. Doug Johnson said the injunction, effective yesterday, was ordered within days of another court ruling allowing the franchisees’ lawsuit against Quiznos to proceed as a class action.
The Toronto Star
May 1, 2009
Quiznos closes plaintiff’s stores
After being certified to pursue class-action suit, owner of three outlets in Oakville shut down
Dana Flavelle
Quiznos closes plaintiff’s stores
After being certified to pursue class-action suit, owner of three outlets in Oakville shut down
Dana Flavelle
The president of a group of disgruntled Quiznos franchisees says the fast-food chain has been granted a court injunction, forcing him to close his three Oakville-area restaurants.
Doug Johnson said the injunction, effective yesterday, was ordered within days of another court ruling allowing the franchisees’ lawsuit against Quiznos to proceed as a class action.
The class-action certification represents a major step forward for the franchisees, Johnson said.
“Without the ability to bring this case forward as a group, franchisees face insurmountable obstacles in enforcing their legal rights. We now have a real chance to fix the problems of the past and help franchisees in the future,” Johnson said.
Once again to quote the now deceased Harold Brown’s book (published in 1980 and updated until Release 32, 2001), Franchising: Realities & Remedies, 1.01 [1]
Background of Franchising
[1] –New Concepts
…..As franchising has grown, however, the growth has been acompanied by a number of disputes between franchisors and their franchisees. While legal disputes are to be expected in any long term relationship, franchisor/franchisee litigation has resulted in franchisors drafting progressively worse franchise agreements for new franchisees to sign. Ironically, even a franchisee who prevails in litigation or arbitration ultimately harms prospective franchiseees in his system. The losing franchisor is faced with two options: (1) alter its wrongful conduct, or (2) draft a more one-sided franchise agreement that states that the franchisor is permitted to act in any manner it sees fit. Remarkably, franchisors almost always choose option number two, and written franchise agreements reflect an even greater imbalance in power between franchisees and franchisors from year to year. Franchisee advocates are forced to argue tougher and tougher cases each year as many courts refuse to recognize the imbalance in the relationship and, instead, enforce the language thrust upon the franchisee.
What a phenomenal business model! Write a one-sided contract, if they sue you, shut them down! If you lose, change the agreement to make sure they can never sue you in that manner again and cripple the incoming franchisees even more! Hello franchisees – are you there! Do you not understand yet? You cannot fight a crook using a system run by the crook’s buddies (the courts)! Call it naivete or ignorance or whatever, but the very reason most end up in arbitration is so that the courts could let the franchisors do “what they please”. If your case makes it to court, then you’ll only end up with a class action or civil case in which you’ll only receive a small portion of your investment (the lawyers take the lion’s share) and then you get to start over! Cool! Awesome! Wage your entire life savings and lose it. Borrow more (now you’re waging your children’s and fellow taxpayer’s future lives) and fight the good fight against the enemy on their turf! While you’re fighting, you cannot make a wage because the franchisor can shut you down! If you win, you might get a tiny fraction back, if you lose, you lose two lives worth of investment. Either way, you get to start over and fighting on prinicple, doesn’t pay the bills. Doesn’t sound like a battle much worth fighting. (I much prefer finding legal ways to make the franchisor’s lifeso bloody miserable, he has to change or suffer the wrath!)
Bloody
BF always gets it right! Franchisors can use their abusive, exploitive, unfair and unbargained contracts —-that good faith prospective franchisees are tricked into signing because of the constructive fraud of the “packageof the FDD and the actual contract — just like a gun to lie, cheat, and steal, as needed, with apparent immunity under the law.
The deck has been stacked against franchisees since the FTC Rule in the late 70′s took franchisors out from under the State Statutes for common law fraud and securities laws to protect the franchisors and their thriving franchisees from charges of fraudulent inducement from their franchisees who would fail to thrive, and would feel that they were defrauded in the sales process and that the real risk of the purchase was hidden from them.
When you understand that the franchisees’ contracts, as portfolios, often become the basis of commercial paper in the form of a stock or security of some kind that is sold to other investors, you understand that the Courts are captured as well under the ineffective FTC Rule that is a statement of federal regulatory policy.
The Courts don’t promulgate regulatory policy or the Rules and generally cooperate with public policy as implemented by The Congress and The Executive. When all three branches of government are involved in establishing public policy that provides a “stacked deck” for the special interests, failed franchisees are sacrificed to this public policy.
In reality, franchisees are sacrificed to the concept of the “greatest good” —- the need to stimulate the economy. Franchisees are merely expendable resources for franchisors under the FTC Rule.
There, of course, must be an appearance that the Courts are open to that portion of the BAR who struggle to get to juries in the Courts.
The “parable of the broken window” is at work in franchise regulation because it is ONLY the first-owner franchisee who really loses when “churning” and “turning” and “encroachment” are all possible under cover of government regulation and contract law and the franchisor doesn’t share in the failure of the first-owner franchisees.
As Les Stewart of Franchise Fool has said, “litigation by franchisees is so often the second victimization of the franchisees.” The only certainty, of course, is that the attorneys get paid on both sides of the issue. The ABA is very happy with the status quo of regulation of franchising and the law of the case. They want no changes to regulation that will actually disclose the risk to potential buyers of franchises because any changes could impact their bottom lines, as well.
The “play” goes on and all we can do is try to WARN new buyers of franchises about how the game is played.