Taken to the Cleaners - Problems with the Ontario Wishart Act?
The Toronto Star had two excellent pieces on Franchise Fraud, which are worth reading because they point some disturbing problems with Ontario's Franchise Disclosure Act.
In the first article, Rita Daly writes about an individual who purchased a cleaning franchise. Dozens of lives ruined after answering job ad
He had paid $7,500 – his life savings plus money borrowed from a friend – for work that never materialized. Devastated and destitute, Adams thought he was alone. But Countrywide, a Mississauga-based web of janitorial companies, has left a trail of debt and broken dreams stretching back to 2001.Twenty-one individuals and families, tracked down by the Star, told near-identical stories of how they answered an employment ad, signed a contract with Countrywide, paid the business up to $12,000 for the promise of steady work, then lost their investment.
In desperation, many turned to small claims court. In Brampton alone, Countrywide companies have been sued at least 45 times since 2002, mostly unsuccessfully.
Given that this is a franchise, what recourse do these people have under the Ontario Franchise Act?
Well, as Rita Daly discovers they are some serious problems with trying to collect from the company. She writes about a couple that there hopes for refund were dashed
They wrote the letters five years ago, in the summer of 2002, following the bankruptcy of a company called Countrywide Maintenance Services Inc., a Mississauga janitorial business. Nearly 100 unsecured creditors lost money, many having paid thousands of dollars for the promise of office-cleaning jobs in the Toronto area."Please help us," wrote one woman who, along with her husband, paid $4,000 plus GST to Countrywide. "We have two kids to feed, car, house to pay rent. The money we gave was borrowed on our Visa."
The couple waited four months for cleaning work when they suddenly got notice the company had gone bankrupt.
Angst turned to anger, however, when some noticed Countrywide continued to do business from the same office and run the same employment ad looking for cleaners. Its trademark company, Countrywide Gleam Masters Inc., took over management, while a new firm called Countrywide Maintenance Systems Inc. resumed operation.
Cleaners tried and failed to get federal and provincial authorities and police to investigate further.
Today, Countrywide continues to operate and still complaints persist. Since the bankruptcy, the operation has, in fact, expanded into a web of incorporated companies, much like a franchise. It attracts investors or so-called "partners" who pay $12,000 to start their own cleaning companies, and who, in turn, are supposed to find cleaners or "subcontractors" who also pay a fee, often thousands of dollars, for the promise of work.
Ms. Daly suggests that there are "loopholes" in the Ontario Franchise Act, which allow this unfairness to continue. "There is no regulatory body to enforce the act, no rules governing contractual relationships and no penalties. Franchisees can demand a refund for no disclosure, but their only recourse is to go to court."
I have addressed the value of regulatory body to enforce the Act before, so I will simply repeat my observations about what should be done instead.
The Ontario Government could undertake to monitor Franchise and Business Opportunities trade shows, and ads for the same, to see that the participants actually have a real disclosure document.
The State of Florida routinely does this with trade shows in Florida; trade show promoters may be liable for misleading advertising otherwise. This is an important feature of due diligence that all states and provinces that license franchises should take.
See also the two updated posts, Countrywide Part 1 and Countrywide Part 2 for additional legal remedies.
