With Canada’s highest court affirming the class certification, the lawsuit will now move towards a full trial on its merits. The lawsuit alleges that Quiznos and GFS illegally conspired to enhance and fix the prices of supplies purchased by Quiznos franchisees for their businesses. The class is defined as “all persons, including firms and corporations, carrying on business in Canada under a ‘Quiznos’ Franchise Agreement at any time between May 12, 2006 and November 23, 2009.”

The Financial Post has written a brief note about the victory that can be read here.

Go to the Supreme Court of Canada’s Judgments in Leave Applications for February 3, 2011

Click here to go to the Quiznos class action home page

Sotos LLP lawyer David Sterns is quoted in the article:

There can be little doubt that the Court of Appeal intended by this decision to signal that class proceedings are ideal tools for achieving justice for economically disadvantaged and vulnerable groups, such as franchisees. In my view, the Court of Appeal wants these cases to be tried on their merits, and may the best man or woman win.

The lawsuit alleges that the Canadian franchisor of the Quiznos chain and others have illegally conspired to enhance and fix the prices of supplies purchased by Quiznos franchisees for their businesses. On June 24, 2010 the Court of Appeal upheld the certification of Canadian Quiznos dealers, allowing them to proceed with a class action lawsuit.

Click here to go to the digital version of the Lawyers Weekly (free preview)

Click here to go to the Quiznos class action home page

I am also of the view that a class proceeding in this case will satisfy at least two of the objectives of the Class Proceedings Act of judicial economy and access to justice.  It seems to me that this case involving a dispute between a franchisor and several hundred franchisees is exactly the kind of case for a class proceeding.

As a result, the Quiznos franchisees will be allowed to proceed as a class in their lawsuit against Quiznos Canada and Gordon Food Services. The lawsuit alleges that the Canadian franchisor of the Quiznos chain and others have illegally conspired to enhance and fix the prices of supplies purchased by Quiznos franchisees for their businesses.

Click here to read the rest of the decision

Click here to go to the Quiznos class action home page

Read the article at: http://www.financialpost.com/news-sectors/legal/class-actions/story.html?id=2543564

Read the full article online at Blue MauMau

Click here to go to the Quiznos class action home page

“Suing your franchise over system-wide issues in individual lawsuits is like trying to put out a forest fire with a squirt gun,” said David Sterns, a lawyer with Sotos LLP of Toronto, who is representing the disgruntled franchisees.

Read the full article at the Toronto Star: http://www.thestar.com/article/627036

Click here to go to the Quiznos class action home page

TORONTO, April 28/CNW/ – On 27 April 2009, the Ontario Divisional Court approved for certification a Canada-wide class action lawsuit brought by Quiznos franchisees against their franchisor and its designated supplier, Gordon Food Services (GFS).

The class action alleges that Quiznos violated its franchise agreements and the Competition Act, a federal statute intended to prevent price maintenance and conspiracies to maintain prices.

The action alleges that Quiznos, which requires its independently owned franchised businesses to purchase supplies from GFS, acted together with GFS to artificially inflate for their own benefit the prices paid by Quiznos operators for their supplies and that such practices violate laws requiring franchisors to deal fairly with their franchisees.

Quiznos franchisees have complained about overcharging on supplies for many years. Until this decision though, the franchisees’ efforts to stop the alleged overcharging were resisted by Quiznos and GFS.  The court drew attention to Quiznos’ heavy-handed tactics in repelling these efforts.

According to Douglas Johnson, the lead plaintiff and President of Quiznos’ Canadian franchisee association, “It is vital that franchisees have access to competitively priced supplies in order to have a chance to succeed.  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.”

In considering the suitability of Quiznos franchisees asserting their claims as a class action, the court endorsed the franchisees’ right to band together to seek justice:

“In our view, a class proceeding would be fair, efficient and manageable, and preferable to any alternative to resolving this claim because of the significance of the common issues in the context of the entire claim. Moreover, a class proceeding would best advance the goals of judicial economy, access to justice and behaviour modification.”

If you would like to learn more about this case, please contact David Sterns at dsterns@sotosllp.com 416.977.5333 ext 313 or Allan D.J. Dick at adjdick@sotosllp.com 416.977.5333 ext 309.

This article originally appeared in Canadian Opportunities Magazine

Start-up franchising ought not be a shot in the dark.  After all, one of the biggest selling propositions of franchising over starting up an independent business is that with franchising, the franchisor has invested the time, money and sweat equity to work out all of the major impediments to operating a unit of the business so that the franchise concept may then be used by a prospective business operator or franchisee.  As a result, the franchisee gets a head start in exchange for the initial and on-going fees that it undertakes to pay.  Unfortunately, not every start-up franchisor follows good franchising practices often resulting in poor outcomes for everyone involved.  What follows is a discussion of some of the common – and easily preventable – difficulties faced by the start-up franchisor.

1. Idea vs. Successful Business Concept.

A good idea for a business does not mean that it is ready for presentation on a franchise show trade floor.  Although virtually anything and everything is franchisable, converting a good idea into a great concept is neither simple nor straight forward.  Even a wildly successful business unit does not equate with success when multiplied.  While many franchises originate from a single successful operation, the successful start-up franchisors go through a process of replication, refinement and evidence of profitability in different locations and under different management.  A franchise concept needs to exist and improve under a variety of conditions before franchising is undertaken.  This trial period is necessary to validate that success is not location dependent (the proverbial seafood restaurant on the Vancouver waterfront) and that there is a viable market beyond the direct management of a charismatic founder.

The failure to understand and invest in the systematic process of franchising often consigns fledgling franchise concepts to the dustbin of history.  Those that manage to survive generally do so after the founders have been forced to sell the concept to more experienced and better capitalized investors who understand franchising as a process. The start-up franchisor who invests in doing it right after going through the crucible of franchisee dissent and litigation can also experience great long-term success.  As I always counsel my clients, you either make the investment upfront or you will make a much larger investment later.  There is no escaping the cost of proofing the concept.

2. Unprotected trade name.

The first discussion between the prospective franchisor and his or her lawyer should end with instructions to secure trade mark protection for the distinctive trade name and identity of the prospective franchisor. Without a secure trademark and related intellectual property, it becomes extremely difficult to franchise.  Yet, without fail, year after year, start-up franchise companies receive a nasty letter from a law firm advising them that the trade name they are doing business under and have licensed others to do the same is the protected property of their client and that the franchisor must cease and desist from further use and pay unspecified damages.  While any problem can be resolved with enough time and money, the expense of re-identification or buying-out the interest of the rightful trademark owner is going to be far more expensive than the modest cost of investigating and securing or selecting an alternative trade name from the outset.

3. No Manuals.

I have yet to see a franchise agreement, however badly written, that does not contain a provision requiring franchisees to observe the franchisor’s proven methods of operation and management techniques as described in more detail in one or more manuals.  Yet many a start-up franchisor will grant franchises without a manual, or worse, by producing one that is a copy of somebody else’s system, replete with references and processes or equipment unknown to this franchise system.  While the franchise agreement defines the nature of the legal relationship between franchisor and franchisee, the manual is the heart of every system.  The failure of the franchisor to prepare a manual or manuals that describe the details of how its particular business is run always demonstrates premature franchising.  While corporate consultants can be hired to assist with the preparation of manuals, this exercise requires extensive input and time commitment from the principals of the franchisor, which explains, in part, why manuals get neglected.