Developments in the Business
and Law of Franchising

Posted on June 10, 2005

Idle Legislative Hands

The legislature of the tiny (population: approximately 140,000) province of Prince Edward Island has apparently had a light legislative calendar of late. 

While franchising in some provinces (most notably Ontario, Quebec, British Columbia and Alberta) makes up a significant amount of the small business sector, it is unlikely that the same can be said for small Prince Edward Island (I can't find information on how many franchises actually operate in Prince Edward Island, but I'm guessing there's a Tim Horton's).

Even so, in a flurry of legislative activity, the Prince Edward Island legislature has promulgated the Franchises Act, which is modelled largely on Ontario's Arthur Wishart Act (Franchise Disclosure).  This appears to be at least somewhat of a blow to the Uniform Law Conference of Canada's efforts to provide a generally-accepted model of franchise legislation for provinces across Canada to draw upon. 

The Uniform Law Conference adopted a Model Franchises Act in 2004 (itself seemingly largely modelled on the Arthur Wishart Act (which, was itself modelled after the Alberta Franchises Act (although you probably won't get anyone in Ontario to admit that), in the hope that provincial legislatures which currently do not have franchise legislation (there are now 7 such provinces) would use it as a model for their own legislation in the future.

While this may be discouraging, it shouldn't be particularly surprising for the Uniform Law Conference of Canada, which has produced a library of perhaps useful, but largely unused uniform and model laws.

In the interim, if you're planning on being the fourth franchise into Prince Edward Island, keep the (so far unproclaimed) Franchises Act in mind.  Idle legislative hands are the Devil's tools.

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Posted on May 12, 2005

Cendant Franchisees Can't Rest on their Laurels

Cendant is the franchisor of a number of quality hotel brands, mainly clustered around the economy/mid-range markets, including  Days Inn, TraveLodge and Super 8.  While my preference while travelling is usually to stay at hotels with massive beds made up with imported sheets, a fun lounge and a fully stocked minibar, I've always had very good experiences staying at Cendant franchised hotels.  Cendant has clearly recognized the importance of one of the key ingredients of a franchise system's success or failure; that is the maintenance of a uniform level of quality across a system's franchised units. 

Franchisors need to be particularly vigilant about ensuring that franchisees are living up to the standards set by the franchisor, as the system could thrive or die based on the public's perception of the brand itself.  Non-compliant franchisees can easily drag down the reputation of an entire brand.

This can be particularly true for hotel franchises systems, each of which will be somewhat unique based on factors such as locale and market.  However, if franchisors stay on top of quality control and brand management issues, brand recognition and value will increase (and with it, occupancy rates and revenue).

As this MSNBC article indicates, Cendant is well into its "Project Restore" program to increase brand uniformity, identity and public perception across its various brands.  Part of any such program is necessarily terminating (or more likely, opting not to renew) the franchise agreements with franchisees who do not live up to the systemwide standards of quality, service, etc. that are set by the brand.

As part of Project Restore, Cendant has dropped between 580 and 600 underperforming properties from its brands.  Cendant franchisees who wish to continue benefitting from the strong brand recognition that accompanies the flying of a Cendant flag, may be losing some sleep until their properties are brought up to Cendant's standards.

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Posted on April 21, 2005

Burger, Fries and a Stoli No Longer

French spirits company Pernod Ricard, which has just offered $14.2 billion (US) to acquire Allied Domecq in concert with Fortune Brands of the United States, appears to be in a hurry to cut loose Allied Domecq's franchise operations.

Allied Domecq, which is a leading international distiller (its portfolio of brands includes a few of my favourites:  Laphroaig and Ballantines Scotch, as well as Stolichnya Vodka, Kahlua and Canadian Club) currently owns and operates the Dunkin' Donuts, Togos and Baskin-Robbins franchise systems. 

Emmanuel Babeau, the Finance Director of Pernod Ricard, notes in this Reuters article that Pernod Ricard expects lots of interest from American companies in the franchise systems.

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Posted on April 20, 2005

Quite an Appetite

Just in case there was any doubt left in anyone's mind as to the economic impact that China is having on the world's economy, we have this article which was issued a few days ago by Xinhua, China's official news agency (I suspect there are few if any unofficial news agencies in China).

The article notes that China now has more franchises than any other country in the world (some 120,000 plus of them).  That's a pretty impressive number for a country that has really only opened itself up to the kind of investment required to establish international franchises a decade or so ago.

We've all been reading about and seeing evidence of Chinese economy's voracious appetite for steel, concrete, electronics and cars.  It looks as though the appetite of the Chinese people for fried chicken, hamburgers, and cleaning services is just as voracious.

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