British Columbia Law Institute (BCLI) Releases Report on a Franchise Act in British Columbia

Members of the VCSFA had an opportunity to meet with Greg Blue of the British Columbia Law Institute (BCLI) approximately one year ago where we had the chance to hear more about the plans for a proposed Franchise Act for BC.  We created this post shortly after this meeting.

At this point, it was in the ‘consultation phase’ where feedback was being gathered by stakeholders in the franchise industry.  To read the original document, you can click this link and download it directly or go to the Franchise Act Project page at the BCLI.

We are pleased to announce that the conclusions from the consultation phase have now been compiled into this document: Report on a Franchise Act for British Columbia which can also be viewed/downloaded from the BCLI project page above.

In the near future, we will write a report with our feedback on the report.

The VCSFA would like to extend our most sincere thanks to Greg Blue and all the others who contributed to this worthwhile project as it has already contributed to the exposure of the oftentimes questionable nature of the Franchise-Franchisor relationship in general, but especially in BC, and will most certainly help any potential buyer (who does their due diligence) avoid some of the common pitfalls prevalent in the industry,

 

 

Blenz Coffee Sells Off Corporate Training Centre at Prestigious Library Blenz

Blenz the Canadian Coffee Company LTD has sold their corporate training centre at Library Square to a new franchisee.  A sign reading “This location has new owners! We look forward to serving you!” was posted on the window.

new-owners

This location was a very useful component to the Blenz brand and had been the location used not only for giving new franchisees (owners) a chance to train with the public before running their own stores, but also for hosting events such as ‘That Barista Thing’.  They also used the location to do dry runs on new products and get feedback from customers.

This location has a challenging history as it was reportedly owned by a franchisee before Blenz took over the location from the upset owner.

Adding to the story of the sudden recent change of hands of this prestigious location is the simultaneous erection of a dividing wall between what was the ‘training side’ (left) and the ‘customer side’ (right) as shown in the this photo:

closed-training

This most serious corporate decision begs the following questions:

  • Where will new franchisees in the Blenz chain get trained moving forward and how will this affect the quality of the training?
  • Has Blenz protected the current owner of this Library Square location from a potentially competing business opening right next store?  There is not hint of what kind of business will be moving in to the former training space.  What if it turned out to be another coffee shop or tea shop?
  • Why did Blenz sell this location?  Did the city of Vancouver charge too much rent?  Our reports show that lease rates in Library Square are some of the most manageable in the city.  There are fewer locations with such a captive audience as library square.

This seemingly silent transaction should prompt franchisees and all stakeholders involved with Blenz the Canadian Coffee Company LTD to be on high alert if this decision was indeed not explained in advance.

As always, send us your industry information and we will be pleased to do a follow up report.  We are here to help.

Before you Sell a Coffee Shop Franchise in Vancouver – Commercial Agents

Sellers Beware

“COFFEE SHOP FRANCHISE OWNER HELD HOSTAGE FOR ONE YEAR BY HIS AGENT

Imagine reading that headline in your local paper.  You’d probably want to read every word in the article to see how something like this could happen in a free country! Well, it does.  Right here in Vancouver.  However, it’s not the kind of hostage situation with guns and bombs,  but no less psychologically damaging and abusive.

What we’re talking about here is the fact that an agent can, by law, hold you hostage to the listing agreement you sign for a year (or whatever you happened to sign for).

Let us first state that this legal commitment is not necessarily a bad thing – in fact, it’s a good thing because sometimes sellers will abuse and use their agents and make them lose their justly deserved commission.  In that case, of course, the contract is a good thing to have enforceable.

Let’s allow one of our members tell you a true story of what happened to him this week when working with an agent that his head office strongly encouraged him to work with.  For anonymity, let’s call the head office company B and let’s call the agent M and the store owner A:

“I was approached by the leasing guy at B.  He said that M has a buyer.  B strongly recommended that I work with M because this buyer will help me get out of the business sooner. Also, B said they would drop the 7.5% transfer fee [that’s the money the owner has to pay to the franchise when he/she sells his/her store] AND M would not charge me a sales commission because he said this ‘was a favour to B’.  Since B has more experience in the sale of franchises, I took their advice and decided to work with M even though I had my own agent. Another owner had even warned me that this guy held him hostage before but I didn’t believe it.

Next, M shows up at my shop with what looked to be a basically blank document that I’ve never seen [see image above].  I’ve never listed a business for sale before.  He didn’t even explain it but just said “Sign here and this will be enough and then I’ll bring the offer.”  There was no explanation of what was on the document, what the document meant, nor what an ‘exclusive listing’ meant to the person signing.  I was about to learn the hard way.

A few days later , M shows up with an ‘offer’.  I couldn’t believe my eyes.  The ‘offer’ was for 25% of (or 75% less than) my asking price!!  What?  Are you joking, man?  So I threw the offer back at him and told him I don’t want to sell it.

During this time, my friend was selling his coffee shop franchisee, too, in almost the same situation.  In his situation, M brought an offer for 30% of what he wanted.  He contacted M and said “I’d like to end this relationship” and to him, like to me, M said ‘we don’t have a relationship because there is no commission.”  My friend still demanded the unconditional release documents and M replied “I’m a man of my word so I’ll send them if you want them.”  My friend told me that he thought it was strange that he is sending release documents for a relationship that M said didn’t exist.  When I called and ask for the documents he told me the same thing – there is no relationship.

I was happy now.  I immediately approached my agent (M2) and asked him to list my store for sale.  M2 happens to work in the same brokerage as M.  As soon as M2 listed the store for sale, M approached his broker and asked him to pull the listing because he had a one year exclusive listing with me! What?  No way.  Is this happening?  Yes.  Apparently it was something I signed for that I didn’t read.  M then called and left a voice mail for me saying “You have an exclusive listing agreement with me for one year and if you have any problems with that you can contact my broker.”  At this point it got very interesting.  I contacted M’s broker to complain.  He replied “M has the only rights to sell B franchises in Vancouver.”  I was shocked.  What was he talking about?  Did M convince his broker that he was the only one who could sell B franchises?

Immediately I contacted B and told them what was happening by email.  I asked if they would prefer to deal with my lawyer or with this agent.  They replied back shortly later that “We do not have any such exclusive relationship with M”.  At that point M’s broker was contacted and educated about the truth and asked M to send the release documents. Finally!  I’m free to list with whom I want.

That night I decided that I was going to work with M2 and started again to list with him.  This time M’s broker asked him not to list through their brokerage.  Now he’s trying to tell me which brokerage I can and cannot list with even though I do not have a valid listing agreement with anyone! Crazy.  To this day I am still arguing back and forth about this.  My friend had listed with six or seven different agents over the years and only one agent would not send the release documents – the B agent of choice: M

An exclusive listing is a cause of concern for the following reasons, we learned the hard way:

  1. You cannot reach out to the real estate board to get help so the agent operates to some extent ‘outside of the law’
  2. Your store does not get posted on the ICX.com (MLS for commercial) therefore loses lots of exposure
  3. You can’t work with another agent until this agent releases you

Here are some red flag comments that you should be aware of. They may be true but consider them a red flag until you see action:

  • “I have buyers looking to buy a coffee shop franchise right now.  Just sign.”
  • “I market the store privately.”  If you ask for details on this you may find out what that really means is “I only put your store on my personal web page and pray to the stars that a buyer finds it.”
  • They do not go over in detail with you the initial listing agreement or give you sufficient time to read the details

Here are some red flag comments that may indicate you are about to get sucked into some kind of secret game:

  • I’m not getting paid.  I’m doing this as a favour
  • The buyer that I had got sick, but don’t worry, we’ll find another one
  • I’m a man of my word

Why would someone volunteer to put themselves at risk as an agent for free?  Why did your ‘sure thing’ buyer disappear?  Why are you telling me you are a man of your word? By doing a transaction together with integrity I will see that.

We hope this article will save many people many hassles.

As usual, don’t hesitate to contact the VCSFA as we are always ready and willing to help anyone.

Wikid Franchise dot Org – A Possible Ouch for Franchisors

I suppose the VCSFA has become to many coffee shop franchisors in Vancouver the proverbial thorn in their side.  Word is getting out that we exist and that our purpose is to educate the public about franchising – coffee shop franchising to be specific – and that the relationship between the franchisor  and franchisee must be one of both give and take.  It must be one of both speaking and listening.  It must be one of democracy and fairness.

This video is painful to watch because its creator was obviously part of a franchise where such necessary components of the relationships were absent.  During the video the characters gave reference to a website that we had not yet stumbled upon – WikidFranchise.org – the ‘wikileaks of franchising‘ it seems.

We have not verified yet the quality or accuracy of the posts found within, but it is certainly a goldmine of ‘internet information’ that may contain truthful information posted anonymously – a franchisor’s worst nightmare and a great blessing for the purchaser of a franchise.

Call us old fashioned, but we still really believe that the franchise model could be a very profitable and amicable one.  There are surely such franchises out there.  Until they are all superb in their business dealings, it is necessary for organizations like ours to make sure that the public is aware of what’s out there.