Hon. James McCrae (Government House Leader): Mr. Acting Speaker, I am not rising to grieve or anything like that. Earlier today on a matter of House business I raised a number of matters. Since that time, there have been discussions between House leaders, and I believe it would be agreeable to all honourable members if we agreed that the House would not sit this evening but that other matters would take place throughout the course of this week due to all of the circumstances out there in Manitoba. I think I have this accurate when I say that we are agreed that the points made earlier on about the deferral of votes and the requirement for quorums in the House and the altering of the rule regarding the number of members who might request a recorded vote remain accurate. However, we would not sit this evening. We would waive private members' hour for each of the days of this week. It had been our intention for the Committee of Supply to sit until midnight this evening, but I think that with that concession with respect to private members' hour, we have basically an hour for our replacement here, so that is what I think we need to see.

I think that some honourable members would appreciate the opportunity to be active in their constituencies if the House did not sit on Friday, and because we have agreed that there would be no requirements for quorums or recorded votes, we could sit on Thursday morning between the hours of 10 and 12 to deal with bills that are before the House. It would be my hope at that time that there would be a full discussion of the bills. I understand that some honourable members are prepared to begin debating some of the bills.

So, very simply, the House will not sit this evening. The House will not sit on Friday. The House will sit on Thursday at ten o'clock until 12 for a special sitting to deal with bills, and there will be no private members' hour this week.

Mr. Doug Martindale (Deputy Opposition House Leader): Mr. Acting Speaker, as acting House leader for this caucus, I would just like to put on the record that we have agreed to the replacement of the Friday hours on Thursday and to making up the Estimates hours during private members' hour.

Now, we did not discuss no votes continuing all week. However, in view of this agreement and in light of the fact that it is the same as last week, I am going to go out on a limb here and say that we will also agree to no quorum and no recorded votes from Monday to Thursday since the government has agreed to these other measures, and it does seem to be identical to last week.

So we will extend the no recorded votes and no quorum call, as well. Thank you.

Mr. Gary Kowalski (The Maples): As the House leader for the three independent Liberal members here in this Chamber, this is the first I have heard of these arrangements, but because of the serious nature of the flooding and the need for us to do work in our constituencies, I could say on behalf of the three independent Liberal members in this Chamber that we have no objections to these changes to the rules.

The Acting Speaker (Mr. McAlpine): Just for clarification, deferral of votes in the House and committees, waiving the quorum requirement in the House and committees and the altering of the rules regarding the number of members who may request a recorded vote; not to sit this evening; to waive private members' hour this week; Thursday a.m. from 10 to 12 we will sit with a special sitting to deal with bills and not to sit on Friday morning. Agreed? [agreed]

It was moved by the honourable government House leader, seconded by the honourable Minister of Culture, Heritage and Citizenship (Mrs. Vodrey), that the Acting Speaker do now leave the Chair and the House resolve itself--[interjection] Order, please. I will repeat that for the benefit of the members--that the Acting Speaker do now leave the Chair and the House resolve itself into a committee to consider of the Supply to be granted to Her Majesty.

Motion agreed to, and the House resolved itself into a committee to consider of the Supply to be granted to Her Majesty with the honourable member for Pembina (Mr. Dyck) in the Chair for the Department of Consumer and Corporate Affairs; and the honourable member for Sturgeon Creek (Mr. McAlpine) in the Chair for Children and Youth Secretariat.

The Acting Chairperson (Mr. Peter Dyck): Order, please. Will the Committee of Supply please come to order. This afternoon, this section of the Committee of Supply meeting in Room 255 will resume consideration of the Estimates of the Department of Consumer and Corporate Affairs.

When the committee last sat, it had been considering item 5.1. Administration and Finance (d) Research and Planning (1) Salaries and Employee Benefits on page 24 of the Estimates book. Shall the item pass?

Mr. Jim Maloway (Elmwood): I believe we left off the other day with the minister in full pursuit of information on the franchising act. I am sure that he has a lot more information he wants to impart to us, so I would like to turn the floor over to him and hear what he has come up with.

Hon. Mike Radcliffe (Minister of Consumer and Corporate Affairs): I would thank my honourable colleague for the opportunity of putting a few remarks on the record with regard to our position currently with franchising. I want my honourable colleague to know that, of course, I have an open mind on this issue, and I am always open to suggestions and solicitations. At the present time, we have no intention to bring forth any legislation with regard to franchising, to limiting the scope and ambit of individuals contracting on franchise arrangements in the province of Manitoba.

My director, who is on his way to the committee room as we speak, has advised me that there is some franchise legislation in other provinces. At the current time, we feel with the arrangements that we have under the scheme referred to as NADAP, which I am told is a relationship between the dealers, the car dealers and the manufacturers, and CAMVAP, which is the arrangement between the--[interjection]This is not rocket science--that the issues which form some conflict within society between car dealers and the manufacturers can be addressed with regard to this issue, this scheme of communication and mediation, the Consumers' Bureau which governs the issue of franchising between the members of the public, and what I would perhaps euphemistically refer to as those individuals who are trying to deceive by fraudulent means our good citizens of Manitoba, that in fact we have the whole sphere of activity covered.

We have been reticent to get involved with any further relationship between the parties, the contracting parties in Manitoba. The best advice, I guess, we would give to contracting parties, because we believe so strongly in the sanctity of contract, and not wanting to upset the natural balance that exists in the marketplace between two contracting parties, is that if individuals are proposing to enter into franchise agreements that they consult legal counsel, and that legal counsel is the best line of defence that a member of the public can have for protecting themselves if there is some imbalance economically, and I would personally affirm, of course, given my background, that there is no replacing good legal counsel and advocacy.

So, on those few remarks, that sort of gives the overall philosophy, I guess, of where we are coming from on franchising, but, as I say, Mr. Chair, if my honourable colleague does have some specific issues that he thinks should be addressed, I would be delighted to hear them.

Mr. Maloway: Mr. Chairperson, under the Research and Planning part of the annual report '95-96, I guess it is the third paragraph from the bottom, they talk about--

An Honourable Member: What page is it?

Mr. Maloway: What page is it? It is page 8. There is reference made to franchising legislation in Canada and the United States, so I cannot see the Research and Planning department being requested to look into franchising legislation in Canada and the United States if they have absolutely no intention of looking at implementing such legislation. I mean, why would you go to all the effort and trouble of doing this research if you plan to just leave things in the free market, which is essentially what you are saying?

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Mr. Radcliffe: I am advised, Mr. Chairman, that our department did some research into what was being done in Ontario with regard to franchising and also with car dealerships in order to keep Manitoba abreast of what is being done in the rest of the country, so that we can analyze what legislation is being discussed. We felt the bottom line of the department was that they felt right now there was no need for any further action, but they did want to do the research to see that we were not being left behind.

Mr. Maloway: I would like to ask the minister, then, whether the department looked at the legislation that is currently in place in Alberta, and could he give us an update on what Alberta is doing in this area?

Mr. Radcliffe: Mr. Chair, I am advised that at the time the department reviewed the Alberta legislation which, in fact, they did--and I can confirm to my honourable colleague that they did--that the focus of attention or concern was the relationship between the car dealers and the manufacturers from a franchise point of view.

I believe that a point of irritant that was raised was the car dealership in one of the small towns in Manitoba which had had a longstanding history and was an integral part of the small rural centre, as I am told that many car dealerships do form a vigorous and essential commercial centre for some of our small centres in Manitoba, as I am sure a number of the members of this committee can attest to. The NADAP scheme was considered to replace or counterbalance and supply all the needs that were legislated in the Alberta scheme. Also, the outcomes coming from the Alberta legislation were in some doubt as they remain so at this point in time, because I believe the car manufacturers were trying to gain some exceptions to the legislation.

That position has not yet clarified itself, but the car franchise relationship was the major issue of concern when the department was considering the issues that were set out on page 8 of the report referred to by my honourable colleague.

Mr. Maloway: Well, then, who requested that the department look into the franchise legislation as it relates to cars and not in general to other areas?

Mr. Radcliffe: Mr. Chairman, I am told that the minister of the day who was my predecessor was the person who directed the inquiry from the perspective of the car dealership, but I would add that there was an overall inquiry as well as to the general franchising situation in Canada in other provinces.

The conclusion by the department at that point in time was that there were no other areas of conflict in Manitoba of which they were aware at the time that they did the research. There was no further need to legislate or regulate in Manitoba on franchises until some need had been identified.

Mr. Maloway: Did the department look at Alberta, and what did it conclude by looking at the Alberta model?

Mr. Radcliffe: I believe the department did look at the Alberta model. Again, they felt that as the one issue that was a source of conflict in Manitoba was addressed by NADAP and that the issue with regard to the relationship between these parties in Alberta was still being negotiated and in doubt, they felt that there was no further need at that time to either recommend or introduce any of the Alberta legislation into Manitoba, that we, in fact, had a distinctive Manitoba demographic and economy and that we should not just, holus-bolus, adopt the Alberta legislation.

Mr. Maloway: When the department looked at the Alberta legislation, did they look at the old legislation or the new legislation?

Mr. Radcliffe: As a point of clarification, Mr. Chair, the old legislation being pre what year?

Mr. Maloway: The previous legislation being circa 1989.

Mr. Radcliffe: I believe the department looked at both the old and the new legislation. Some of the differences between the old and the new Alberta legislation was the level of disclosure, a demand under the new legislation that the parties deal with each other with a level of fairness and a requirement that a body enact commercial codes or regulations to deal with each other. Again, the conclusion was that there was no commercial need for this legislation yet in Manitoba.

Mr. Maloway: My understanding of the Alberta legislation is that the current legislation is actually weaker than the 1989 legislation. As I had indicated the other day, what impressed us about the old bill was that it required some certainties on the part of the franchise seller and some guarantees. If there were guarantees being made, they would have to be followed through, so that if a person where to purchase a franchise in Alberta, they would have certain safeguards that they would not have in other provinces.

For example, there were requirements of disclosure, there were requirements of financial statements, and, as I had mentioned the other day that most importantly there was a requirement that any promises that were made had to be adhered to. So, in other words, if a company was to promise a million-dollar advertising campaign to its franchisees in their first year of sign-up, then they would have to follow through on that. If they did not do that, then they would have penalties under the act.

There is a major problem with franchises across the country where the franchised companies, not, I do not think, deliberately, I mean some bad operators do have a--because there is a franchise organization operating in the country. I just do not know what it is called exactly, but the franchise operators, there are probably a few around who just have a history of having bad practices, but most of the indications are that a franchise operator is not deliberately trying to misrepresent or defraud people.

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What happens is the economy turns sour maybe, or they make a bad business decision somewhere along the line, or they expand too rapidly which happens quite often. They see an opening, they run for it and decide to go from 10 stores to 100 stores--that sort of thing--and they make promises. They tell a prospective franchisee: If you sign up with me, you pay your $100,000 or your $50,000 franchise fee; and in return, in addition to the turnkey operation that we provide, we will do the following; we will advertise $1 million in the first six months or $1 million in the first year; okay?

What typically happens is that they sign up a few franchisees, but they do not get beyond two or three and they expect to have 10. So cash flow problems develop and the result is they do not spend the million dollars in advertising, and because they do not do it, one feeds the other. They do not spend the money in advertising, so no more people sign up--right. So you have the existing base of franchisees who are very frustrated about this, and they have no way to be protected.

Now how did it work differently in Alberta? Simply this: that the up-front fees, be they $10,000 for your doughnut shop or $20,000 for whatever it is that you are putting up, be put in trust.

I appreciate the minister saying, well, if you deal with a lawyer that you can achieve the same result, but why should you make things any more cumbersome and expensive than necessary when you can have legislation like this that helps people foresee these things before? They can do their own due diligence without having to rely on the lawyer to do the due diligence for them.

So what has happened, or what did happen, was that people who were buying franchises would tend to feel more comfortable buying them in Alberta because they knew that there are up-front fees--and do not forget that these are people's life savings. I mean, there is a numerous amount of people in society today who do not wish to pursue the same career for the rest of their lives. They farm for 10 years, and they are a politician for 10 years, and then they want to go on to something else. So, typically, they leave their teaching job or their police job, and they get a big buy-out. They take their money, and this represents their whole life savings, and they walk blindly every day of the week into all sorts of travel franchises and doughnut franchises, and you name it. They are walking right into it.

Admittedly, the franchise opportunity has got a better chance of succeeding, the statistics say, than just a general business. So they are probably better off investing in the franchise than they are just setting up on their own. But, nevertheless, the landscape is littered with experiences such as this, and we are going to see a tremendous amount more in terms of numbers in the next 10 or 20 years as an unprecedented amount of wealth changes hands as the older generation dies and the current generation takes over the wealth. So there is going to be a tremendous transfer of wealth over the next 10, 20 years--as I said, unprecedented--and what has happened is the franchising industry, I believe if you look at and read their publications--and I do not subscribe to any, I do not get any, but I do know that they project that their type of business is a growth industry.

I think that we should be looking proactively here to protect people who come through their life, and, through no fault of their own, take all their hard-earned savings, put it into a franchise and, at the end of the day, find out that, after four or five years, they have got nothing to show for their life savings. Let me tell you, it can happen to you. It is a scary proposition.

What Alberta did--and I say "did" because I am not sure that they do it now; there was a seat change in Alberta three or four years ago, and they took a hard-right turn. At that time I got the impression that they were gutting the legislation that we liked. We were very interested in knowing why it was that Tory Alberta had this most progressive legislation in the country. I would have to go back to my 1989 files, but there were some reasons for it, and I cannot--I would have to be doing it from memory right now, but there was a big bankruptcy or big trouble in Alberta to do with the dairies, or I am not sure what it was exactly.

Mr. Radcliffe: Mr. Chairman, was that the Principal Group failure?

Mr. Maloway: Well, no. But your thinking is on the line here. No, it was not that; nevertheless, there was a good solid reason why in Alberta, coming out of this big fiasco, that they developed this legislation.

So, when you think about it, does it not make sense that, more so today than even 10 years ago, because there are so many of these franchises right now, that promises made--now let us just think about now what the minister has said about leaving it in the hands of the lawyer. I mean, the cost of litigating what amounts to 50-page franchise agreements would be tremendous. I mean, the franchise company has all the money. They are the ones that draw up the agreement. The agreement has all kinds of gag orders in it; typically, that is what I found when people phone me and give me this information. You should hear some of these stories, and I am sure your Consumers' Bureau has--they have probably tons of these things too. People, typically, are embarrassed when they find out they have put money into these things. They are embarrassed about it. They also find that their agreement is worded in such a way that they really do not have much hope of winning their point. In other words, it is a buyer-beware situation that they have gotten themselves into. Right? The franchise company that is selling them says, yes, verbally I may have said I am going to spend $1 million, but sue me. Right? Well, good luck trying to sue this guy who is not operating anyway. He has got your $100,000. Your $100,000 is gone. He is in financial trouble.

So what they did was, they said we will take the $100,000 up front and put it in a trust fund. That is what a smart franchise operation buyer should do with his lawyer. His lawyer should be smart enough to say: Let us not give them the money until we do this, this and this. Well, the franchise operator would say to that lawyer, probably say: Well, I have got lots of fish in the sea here; I will go and deal with somebody else.

So the legislation gives the parameters as to how it is to be dealt with. It basically says, put the money in trust. When you fulfill your promises, then you get the money. By the way, if you do not want to wait for the money, then do not make promises. Do not say you are going to spend $1 million if in fact you are not going to do it. So that is what it did. Now, it also had financial statements that had to be given. It had disclosure. I can certainly provide the minister with a copy of this booklet for copying purposes.

It had a whole lot of other things that we thought were kind of abnormal for a Tory government. I mean, it was a nice blue, as you can see. It sort of had the right colour for a Tory government, but it certainly did not have the ideological content of a Tory government. This was socialism run rampant here. So we were quite pleased that we saw this piece of legislation. Alberta was the only piece of legislation that we ever found that, so we drew from Alberta. We were drawing from all over North America on different things, but nothing from Alberta except for this little piece of legislation. So we thought it was particularly good. We thought that it was so good that we went ahead and got the Legislative Counsel to draft us a bill, and because we do not have sufficient numbers to get it passed, it did not go anywhere. But we introduced it--I think it was in 1992. So I recognize that the political environment is such right now that this is a difficult row to hoe for any government that wants to be interventionist.

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But I am the eternal optimist here and I always think that--you know, I look back to Ed Connery, and Ed Connery did buck the government. If you look back, this government has taken opposition suggestions and brought them in. We had The Business Practices Act, and, to our horror and shock, the Tories went and copied the bill, introduced it. We could not believe that. Ed Connery would be successful in doing this, but I guess he just went into the cabinet and said, look, I have made a commitment and I am going to do it. That would not have happened with half of the cabinet over there, because philosophically they would not believe it. They do not really believe in this kind of intervention. So this government has had its brighter moments when it has done things like this.

You know, no-fault auto is another good example where we took the recommendations of the justice and made all the recommendations on Autopac, and we never thought the government would bring in no-fault auto. It just never would have happened. We went on a big campaign on the radio and even had the minister on CJOB saying, no, this is not going to happen. We thought we were in pretty good shape here because it was like a $70-million saving, and it was a good issue for us. Lo and behold, out of the blue, the minister announces no-fault auto; he stole our best platform and brought it in. How could we argue against what was a good idea, and something they did? So it is not as if we feel we are necessarily always talking to a brick wall here because we have had examples of where the government has just turned around and copied what we have suggested and gone ahead with it, and that is great. I mean, that is fine with us.

So I would ask you to take that in the spirit that was offered and look at it, and you can bring it out in nice blue jacket. It is okay by me if you do that. We will just make sure they are orange after 1999, and it just is something that you want to do.

Now let us deal with some of the--you know, the minister made reference to the fact that the department had not been hearing much about these kinds of things. Well, tell me why you are not hearing things about it. You had the guy out selling franchises. You mentioned it yourself the other day. I believe I can mention his name, the Walker case, because I think he has been convicted. At least I hope that is what has happened, but I believe that to be the case. I mean that is what this kind of legislation is meant to deal with, disclosure documents that if you are buying a--first of all, this man could not be out selling these things. He could not go out and sell them if you had legislation like this because you have to register all these franchise people and then they have their franchise.

You know, it is sort of almost like selling an investment. So you have to produce a prospectus, and you have to give a financial statement. You have to do this, and you have to do that. What Alberta found was the operators who were not serious always steered away from Alberta. In other words, one of the safest things to do when you were thinking of buying a franchise is to ask, are you operating in Alberta, and hear what they had to say. You should hear some of the comments that some of them would make. I mean, they would say, well, you know, geez, to operate in Alberta we need $30,000 up-front money to get this prospectus and stuff like this. So what they did was they would set up franchises in all the little provinces across the country, and they would jump from Saskatchewan over to B.C.

They would not set up in Alberta because of this cost, and I can see that the government, being a right-wing government, on Mondays, Wednesdays and Fridays, when they get approached by the franchise organizations, the franchise organization, I know what they would say. I know that the franchise organizations hated this legislation in Alberta; they did not like it at all. I can see them come in to the Premier (Mr. Filmon) and I can see them come in to the individual ministers, saying, look, we do not like this because it costs us money. From their point of view, why would they? I mean think of yourself being on the other side of the fence. If you are selling the thing, you want your cost of business to be as low as possible, and if no other province is doing this, well, then, you do not want to operate in an environment that requires this. But it is an excellent piece of protection.

All I can say is that, if you look at all the people that have lost of money--it might also tell you that there are people that do not feel sorry for these people because some of them--I know one fellow, you know, made a bunch of money up north in a road construction company. I do not know how much he made, but enough to fork out $100,000 for some travel franchise at Polo Park five or six or seven years ago, and after a few months the money was gone. He is a lot wiser now and $100,000 poorer, and I am sure that is not his last $100,000. I do not think he is a millionaire, but I think he took a big hit. He is not about to go complaining about this to people because he is a self-reliant guy and feels foolish for having involved himself in this, but this kind of legislation would have helped him out. The other problem he had was all these gag orders in the contract. The minister is a lawyer; he knows--

An Honourable Member: He should know.

Mr. Maloway: Well, he does know what a franchise agreement is. Has he ever seen a franchise agreement that is less than 40 pages or 140 pages? I mean, these things are big, and they cover every eventuality. Some people think that it is almost slavery to have a franchise because every little detail is--that is why they are successful--is spelled out, and so, in reality, you do not really have to have a lot of talent to operate this thing because it is so reliant on the head office, on the formula. So you just fork over your money, and you follow everything they tell you, buy all the supplies from them, make the doughnuts exactly the way they tell you. So it does not take a lot of talent.

What a lot of these people will tell you privately is that they are slaves. They are tied to this thing; they cannot get out of it. They are, some of them, making money at it, but it is hard work. It is no fun at all. It is not what the--you know, before they get into it they are all excited and so on, but talk to them after they have been in for a little while and you get a little different picture about it.

So in light of that I would like to ask the minister some more questions about this, as to why the government would not want to take another look at something like this.

Mr. Radcliffe: I appreciate all those remarks that my honourable colleague has placed on the record with regard to the legislation in Alberta. In fact, there are a number of issues that I guess I would like to be responsive to here.

First of all, I am familiar with restraint of trade clauses that appear in franchise agreements, but I am not familiar with a gag order. In fact, I would challenge that if there were such a clause saying that there was a gag order, if that were brought to the purview of the court, I do not think that would stand the scrutiny of any judicial interpretation.

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With regard to any information that a franchisee would wish to disclose on how he or she was treated with regards to commitments, guarantees, et cetera, I can tell my honourable colleague that at the present time I have a case which I cannot disclose the particulars, but all I can say is that our Consumers' Bureau is insisting that a particular operator who is trying to operate a franchise operation, I believe, in Manitoba, have a bond and be a bondable individual before they are allowed to operate in Manitoba, so that our safety net is catching some of these individuals who are perhaps trying to manufacture a business out of whole cloth in Manitoba and may well be trying to take advantage of some of our citizens.

Our Consumers' Bureau is a very assiduous group of people and is watching very, very carefully any of the developments and franchise operations that are of a spurious nature that blow into town.

My department also tells me that there is a group emanating out of Ontario dealing with interprovincial trade which has been researching, discussing and contemplating for the last two years about how to approach the issue of franchising and commercial activity What we in Manitoba want to do is to make sure that we do not go out on a limb to be out of touch with the rest of the provinces in Manitoba, and I can share with my honourable colleague that I vigorously espouse this in many, many different areas of my department.

For example, we had some communication with some of our colleagues in other provinces recently about the Securities Commission. There are some very, very aggressive and vigorous steps that are being taken by the different Securities Commissions across the country to harmonize their different laws, so that people who are trying to do business in Ontario or New Brunswick or Manitoba, in fact, have to meet a similar sort of threshold for disclosure, for prospectuses, for regulation for people operating in the commercial milieu.

I think that while these issues do lie wholly in the jurisdiction, the BNA division of power within the control of the provincial governments, that where possible we should all be very mindful that we should try to keep in step with each provincial jurisdiction, so that we have consistency across the country.

I believe that in the franchise world there are perhaps two issues that are at stake. There is the issue of disclosure by the enterprise that is wanting to sell the service, whatever it may be, and then there is the issue of mediation of disputes. I guess I would be responsive to my honourable colleague and say if we have somebody who is operating fraudulently, who is not going to live up to their commitments or obligations, then no matter how stringent we may be with regard to regulations on disclosure of information, we are not going to cure or save people from falling short and being aggrieved from others falling short on their commitments and guarantees and that the only place really where that can be resolved, perhaps, is the courtroom where a court can adjudicate.

I look at a franchise operation where you have a local operator who is producing revenue here in Manitoba from the enterprise, whatever it may be, and one of the integral parts of a franchise operation is that you submit royalty to a central buying authority. So the local franchise operator does have some economic clout or power to withhold payment of royalties or purchase commitments to the central selling agency, be that Canadian Tire or cars or any hardware enterprise or grocery store enterprise where you are committed to purchasing from a central selling authority.

So it would then be up to perhaps the franchisor--I get confused, Mr. Chairman, as to which is the franchisor and which is the franchisee here. I believe the franchisee is the local person, that the franchisee could perhaps withhold payment and make the franchisor pursue him, so that the legal costs would be largely at the expense of the franchisor.

With regard to the issue of Mr. Beuckert and the issue that we were touching on last week, I can tell my honourable colleague that on the individual case that I happened to deal with this franchise operation, one of the first things I did ask for was a financial statement and a bank reference and a description of what the expectations were. Unfortunately, that individual dealing with my client had already peeled some money off from my client, but I do believe that even so there was an obligation under that contractual arrangement to withhold some of that money in a trust fund. I did recover that through the courts, albeit it did cost the franchisee some money to do that; but, of course, I submitted some very modest fees.

But I did want to add as well to my honourable colleague, and I take the praise of the Filmon government where we find it, that when my honourable colleague mentioned that we did adopt the principles and concepts of no-fault in the MPI, that in fact this is not an ideologically driven government, but it is much more a pragmatic government. It is quite prepared if there is a real issue, where small business people or citizens are being cheated of their just due, that in fact we will impose, bring regulatory power to the table in order to prevent small business people from being cheated.

However, having said that, we must be convinced that there is a real need. To date, we have not seen beyond, I guess, the reach of the Consumers' Bureau and the licensing authority that they have for direct sellers, that there has been a need for any sort of interference by the omnipotent power of the Crown, the mailed fist of the Crown, to upset the balance of the citizens in the commercial marketplace. That power must be exercised very, very cautiously and carefully. Having said all of that, I am quite prepared to look through the legislation and review what my honourable colleague has presented. If there are cases where there is an element of society that is not being covered by the Consumers' Bureau and is not being covered by the car dealership arrangements, and that there is disclosure that is not being met and citizens are being cheated, or where there is resolution of disputes that are beyond the reach of individuals in franchising, we are certainly prepared to review it and make evaluations on it.

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Mr. Maloway: The minister made reference to the franchisee being able to withhold revenue, and I guess that probably does happen at some point along the line, but by doing that, the franchisee then violates the agreement and kicks in other punitive aspects to it. I guess where the franchisor always has the upper hand is that initial upfront fee that once they get that, then they just have the trailer fees after that, or the 3 percent or whatever it is, plus the requirement that they buy the product from the central source. I think there is basically a war going on in all of these organizations, but I guess it is probably similar to caucuses, political parties, civil servants and everybody in general. But every time I have seen inside these things, that is what essentially happened. It is the franchisor who has the upper hand. That is the way it would be, because they are the people that started the thing in the first place; are the people who had the idea. They draw the contract out, and they catch all these little guys into it.

There are cases where some franchise operators, and I know they are not all like this and some of the main line people do not appreciate these guys, because they give the industry a bad name, but they keep doing what is called refranchising where they basically select people on the basis that they are designed to fail. For example, a reputable franchise company will check out the prospective purchaser of the franchise and determine several things, including the financial ability of the person, reputation of the person and how well they are going to succeed and so on and will pick and choose and pick only the ones that they reasonably think they can succeed with.

So if you see an operation like--I am assuming Canadian Tire would be like that or McDonald's. Their operators are probably with them for years and years and years. That would be a sign of a franchise agreement that works pretty well.

But you will see some franchise operations where they just seem to be going through people left, right and centre. I think I read something recently about a Mac's milk in the Osborne constituency or somewhere out there that had gone through a whole series. They take anybody that comes through the door pretty much. They get him, put the saddle on him, tie him down, and they work him basically for minimum wage or less, and then they walk away from it. So they lose their down payment. They work for almost free for months. Then they walk away and they just find somebody else. They just keep going, pumping people through this system.

So with that in mind I note that I had some notes here going back from 1989 or even before when I introduced the bill. So I just wanted to review them for a moment here and make sure that I had not missed any points.

One of the things that I was talking about at the time was that there were alarm franchises that were being sold for about $5,000. I am not just certain who was selling those, but I think it was several different operators. Alarm franchisors, we ran into a few of them who were filing complaints. There was $8,000 for a computer franchise. Now, I do not recall which one that was, but there were examples of that; $100,000 for a travel franchise. I mentioned one of them that lost the money. I had mentioned that it required the firms to file a prospectus and that the monies paid up front would be kept in trust until the franchise company made good on any commitments to provide things like advertising.

But there was one element here that I had forgotten about. I am going to mention it now, because it was in here. It is No. 3. This is a big one, and it has to do with franchisees having a protected area. I think the minister will recall that 60 Minutes or some such program in the United States carried an example a couple of years back, and I think it was Subway. Subway, I believe, is the largest franchise operation in the world. It has got an enormous amount of locations and very low up-front fees. They are only at $10,000 to get into a Subway franchise or something like that. What they did, the reason they grew so fast was because they did not give people protected territories. That is what the Alberta legislation required.

The Alberta legislation said that, if you are going to operate in Alberta, you are going to do all of the other things we talked about, but you are going to specify which territory your franchisee has got. Because in Manitoba and other jurisdictions and wherever I believe it is Subway is operated, they would sell a franchise, say, right here in front of the Legislative Building. For at least five or six months you would think you had an exclusive right, but then all of a sudden there would be another one set up across the street. If you think about it or you drive around, just pay attention to that in the future. Drive around and you will see, literally, Subway franchises everywhere. Think about it; they are all over the place. In North America, it is unprecedented as to how many these people have.

The result is that some of the franchisees have been complaining very loudly, and I think there has been some legal counsel retained in some parts of the States, where they have taken it to court at great legal expense to themselves to contest this. In fact, they thought they had a protected area; they thought they were the only person who are going to be operating in Osborne Village; and next thing you know there are four or five different ones.

So basically anybody who walks through the door with $10,000 can walk away with a franchise of that type, and there is no protection of territory. That is also vital because when you sign and give up your $100,000, you do want to be sure that you have got that territory, the exclusivity of that territory. So protected area was another one.

Oh, another good one, and this is a real hot one as well, is consistency of contract. What you will find with these businesses is that while you have the standard 50-page contract, that standard contract gets changed all that time. Were you aware of that? Yes, I believe in Alberta there was a consistency of contract. Whatever you were selling in Alberta, you had to sell the same contract to everybody.

What would happen in Manitoba or anywhere else is the contract would depend on, once again, what the market would bear. If the person was reasonably unsophisticated, they would charge more money, they would take $80,000. So they would take maybe $20,000 from one person, but the next person they would charge $50,000 or $80,000 for the same thing, and they would put in more punitive requirements. So, basically, it is a case of a professional operator who operates a good franchise firm that is successful, pushing the individual as far as they can to get the best terms possible.

One would think that, and I do not know this to be the case, but I would think the GM dealers or Ford dealers probably have the same contract. That would be my guess, right? It would just seem to me that all Canadian Tire stores or all McDonald's stores or all these people would have the same contract. That is what you would think. That is the requirement, certainly, well, because they carry all the same logo on their stores, they sell the same product. If the donut is the same shape and the same weight, then why is the contract different? That is what we found out. Alberta required the consistency of contract, because they were finding some people had, you know, the sweetheart deal compared to others.

So I guess they would find out on their annual meetings, or whatever, of the franchisees when they started comparing notes and finding out that one had a certain restrictive clause in their contract, another one had paid X amount of dollars and another one had--they started comparing notes and they started finding out. I know this to be the case because there have been several examples where that has happened, where unfortunately they do not find out until they are into the deal. They should know before, but they get into the deal, then they form their little association. Then they start comparing notes, and they find out they have got all sorts of different kinds of contracts, all sorts of different kinds of deals, side deals that are made. That, once again, is something you would want to put in some sort of legislation.

Now, the minister--I mean, there were guarantees in terms of equipment, fixtures, royalties, fees and conditions and, once again, I am not exactly sure specifically what those refer to, but there were some problems in that area as well.

Now I am wondering if, and we never dealt with this, but whether it is possible to deal with the franchise question through almost an expanded Securities Commission role, in the sense that the Securities Commission at the moment deals with selling securities and requires prospectus and requires all these other things. Why could we not deal with it through that avenue? What are the legal implications or their practical limitations and implications to not doing it that way? Because I am going to be asking later on why you do not regulate the Grow Bonds, which are turning more or less problematic for the government with failures and so on.

We have been thinking of asking for that requirement, and we may have already asked for that requirement, but you are aware, the minister is aware, there are a dozen Grow Bonds out there, and half of them are in financial difficulty. The investors are getting their money back when these things go down, like the pea plant out in Portage la Prairie, and the investors who put their money into the Grow Bond are getting their principal guaranteed, but all the investors are out the money.

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So the Securities Commission--if we can make the argument with you that you should be putting these Grow Bonds, taking them out of Rural Development and putting them into the Securities Commission, then why can we not make the same argument with you that we can put these franchises under the Securities Commission, because I mean, you know, in reality, what is the difference? You have got people wandering around town right now selling--and we are all aware of the restaurant that went under, The Bombay Bicycle Club, and whatnot. I mean, I have got all kinds of complainants out of that one. I have got tons of complainants from that one who are embarrassed, but they put in money, $7,000 or $10,000, and they were investing in this restaurant. So they were not buying a franchise; they were investing in it, but I mean it is all kind of the same thing. It is money. We are talking about money that people have worked hard for for years, and they have reached a kind of a preretirement age, and they run into some fast- talking operator who convinces them they should throw $15,000 or $20,000 into a Bombay Bicycle Club. They write the cheque, and the next thing you know the money is gone and the good times are all gone, and they do not have any money left.

So I am wondering if there is any relationship here between the sale of the franchises and what goes on under the Securities Commission, because Securities Commission does have some of these requirements, right? It has the prospectus requirement, right? It has the requirement that they have to--I am sure the Securities Commission checks people out for their backgrounds and that. They would not necessarily let a person go out and sell investments and stuff if they had criminal records.

But, anyway, I leave it to the minister right now to respond to that and then maybe I will ask another question.

Mr. Radcliffe: Well, Mr. Chair, my honourable colleague has raised a number of issues, and I have made note of them here, but one of the things that he has raised is that one of the integral attributes, I guess, of a franchise agreement is protected territory and exclusivity of territory. I guess that in itself is a very simple term or issue in a contractual arrangement, and I would suggest that it would be up to the wisdom of the individuals who are contracting to determine that they do have exclusivity of contract.

With regard to the consistency of contract, I can say to my honourable colleague from personal experience, not of being a Canadian Tire store operator, but having been an advocate for and a solicitor to Canadian Tire store individuals, that there are different contracts in different places for different dealers. They have to carry the same logo. They have to have a consistent quality of merchandise--in fact, they buy merchandise from a central purveyor--but the financial arrangement and the percentage of payment to the central supplier of material vary from supplier to supplier. It is based, in many cases, on the amount of business that you do.

What I think my honourable colleague, though, is touching on, when he is moving into Securities Commission and, in fact, touching on the people who complain for making bad investment decisions, is that nobody likes to lose money, least of all myself, but I can tell my honourable colleague that I have made some horrendous investments over the years that have--[interjection] That is right--lost me significant monies, and I have made other investments that have been eminently successful. But I do not think that we as a provincial government can pass any regulation that can prevent people from losing money. I think that, if we were to do that, we would have to, in fact, put a lid on any sort of speculative investment that people would make, and I do not think that our government or any provincial government is prepared to do that. Therefore, inherent in the issue of risk when you make investments for private enterprise, you are facing the issue that some enterprises will succeed and others will not.

The Bombay Bicycle Club was an enterprise that, at one point in time, was very, very productive, very successful. Then the restaurant business being as capricious in Winnipeg as it is, the temper of the times moved on, and those individuals did lose significant money, who had put money into it. I can remember, as a solicitor, acting for feedlot individuals, farmers who were running feedlots. Two or three feedlots did nothing but make money because of the timing and the price of beef, and then there were two or three feedlots that I acted for that lost their shirts. The enterprises, the individual investors lost their shirts.

I do not think that we as a government should restrict that sort of activity. I think that you have to have a basic trust that people do look after themselves, that you cannot take away all their initiative. As well-meaning as one might want to be, and as caring as one might want to be, you have to allow people to make good decisions and make bad decisions, and to put your hand on every single investment enterprise or opportunity that they are going to make, I think, in fact, would end up overregulating the private investment enterprise. I would look to, perhaps, the stock market because if you extend my honourable colleague's argument to its logical conclusion, what he is suggesting is that we ought to regulate people's affairs in such a fashion so that they not make bad investments on the stock market, and I can point to some investments that I have made in the stock market over the years where I have lost horrendous amounts of money, which much to my chagrin--

An Honourable Member: You had Bre-X too.

Mr. Radcliffe: My own personal Bre-X. But, with regard to the issue of the Mac's milk enterprise, I can relate to that personally because I acted in some--two operators, I think, with the Mac's milk enterprise on Broadway Avenue, which is in the area of the honourable colleague's associate from Osborne That enterprise was based upon somebody coming up with about a $5,000 to $10,000 investment to buy the stock, and then the difficulty there was that one had to be a good merchandiser. One had to be prepared to make the commitment practically to work filling station hours. Those Mac's milk franchises work so long as you are prepared to be there personally, yourself, as the proprietor and that you can get a reasonable living from them, but you have to put in an incredible number of hours in order to get any decent return. That was my analysis of that business.

If you end up hiring somebody, if they have the acumen to be successful, the nature of the business being such as it was that it is largely a cash business, you have an awful problem then balancing the books and the proprietor then ends up coming up short on the till, often from the back end from your employees. This was with one particular operation, I remember, with the Mac's milk operator, but the individual client whom I represented was very successful in that operation, when he was there operating the enterprise himself. When he turned it over to other individuals, it became wholly unsuccessful.

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So I would suggest that it is not the issue of the franchise itself, but rather the environment in which you are having to function and the fact that you have to be there with a hands on operation in order to make money on a Mac's milk operation.

With regard to the alarm franchises, I recall personally what my learned colleague, my honourable colleague is referring to, as well. There was a whole flurry of activity in Winnipeg, oh, probably five, six, seven years ago with regard to the franchise operations. These operators were basically trying to make castles in Spain or much ado out of nothing, and those things came and went very, very quickly.

I think that the Consumers' Bureau probably is the most effective level of control where you have people trying to sell a concept or sell a territory, such as my honourable colleague is referring to, where you perhaps have these people bonded so that if they do commit frauds or they do fail to live up to their commitments, there is somebody who is in a fallback position who can protect members of the public.

But to guarantee that you do not make a poor investment, I think, would be going beyond the bounds, the powers, the place or authority of where any government should be and, whether it be the B.C. government of my honourable colleague's stripe or the Harris government, which is perhaps philosophically more in tune with the Filmon administration in Manitoba, I do not think we would find any government in Canada today who would be willing to wade in and impose severe strictures on individuals who are wanting to make investments in private enterprise. I do not believe that is where government should be, as long as there is no fraud being committed. That, as I say, is covered very adequately from the Consumers' Bureau people who receive complaints and do go out and investigate and insist that people be bonded.

Mr. Maloway: The Business Practices Act deals with fair practices as between the business and individuals, and I think it is only fair that businesses have some sort of hope for fair practices as between one and the other. I think all we are asking for here is fairness, and to somehow put business on a different level and say that somehow they should be more sophisticated. As they say, there is only one taxpayer. Well, you know, there is only one consumer. These consumers are also these little franchise operators, and people tend to think of the franchise people as being really rich, but, you know, the minister has his own experience with Mac's milk and stuff like that to know that those are not rich people that are buying these franchises.

It is not only Mac's milk. I mean, there was a pizza operator around who was doing the same thing. It was just common knowledge that there are two methods of operating, probably a lot more than two methods, but two main methods of operating in the franchise business, and one is to carefully select the people you are going to do business with and develop a long-term relationship with them.

The other method of operating is just running people through like a mill, and that is what the pizza operator was doing, and that is what it is alleged that other operators do. They know, people in the industry know who the people are that are doing this but, when you think about it, it is not such a bad operation for the franchisor. If you can run half a dozen people through in a year and pick those up-front fees up each time you go, you do not mind if you lose a little bit of your inventory and a little bit of money is missing from the till, because that gives you grounds to turf out the one guy and bring in another guy.

I mean, that is literally how some of these have operated. I am not saying these are the majority. There are a few of them who have operated around the periphery, and it is only when the people get involved in them and they have given their $10,000 they realize there is no escape. They cannot get out and they operate, as the minister said, with gasoline station hours until they drop dead through exhaustion, and they walk. Then the next person walks in. As they walk out the back door, somebody else is walking in the front door with these visions of dreams that they are going to get rich quick.

So what I am suggesting is, No. 1, the franchise business is not just the purview of the $100,000-plus crowd. It is the purview of working people. A lot of them just borrow the money. They borrow it from friends and relatives to buy this little $10,000 franchise, and they essentially buy themselves a life of misery and slavery for the few months that they last, because those ones typically do not last. You are not talking years here. The lifespan of these ones are not years. The lifespans are literally months, because their fees are gone, they are out, and then they get somebody else. So if you put it in that context you are talking about an awful lot of people out there that the government should be looking at providing some protection for.

Now, you know, if the minister wants to talk and this government wants to talk about the law of the jungle, I mean, if you want a free market, then have a free market, but you do not have a free market as it is. As one, before a legislative committee some years ago, a member of the insurance fraternity came before the committee, and I know he said that the insurance business was the most regulated business from top to bottom. Everything he did in a day was covered by some sort of regulation. He was not saying that was bad. He was just pointing it out. That is about as free market a conservative environment as you can get, the insurance business, but yet it is heavily regulated.

So I guess if you were to follow any kind of conservative ideology here of getting out of business, then you would have to ask yourself, well, why do we have--because the minister says, we cannot guarantee. We do not want to make guarantees that you are going to make good investments but, I mean, then what are we doing with the Securities Commission? Why do we not get rid of that too?

I am sure there are some neocons out there who would argue just that. Some of them are going to be elected in the next 28 days to your federal caucus who would argue that, to say that the Securities Commission is an intrusion in business, and we should get to the free market, and there should be no such--I mean, we should have a free market like Russia right now, where there are just no rules at all. That is your logical--if you want to think this thing through, that is where you are at the end of the day, when you take care of all of your protections that you have.

I think most people in this province believe in some sort of rules and regulations for business, that you have to have some sort of rules and regulations. I guess the question is how far do you go in requiring these rules. So I am not arguing that we should be in any way getting rid of any of the regulations we have. I mean, I think we need those, but I am trying to think of an efficient way to pick up some protection for this group of people who for whatever reason are not knocking on the minister's door, but certainly we have been hearing from them, and in each and every case--I mean, let us deal with Subway for a moment.

These people thought they had protected areas. They did. It was either something verbal or they really felt--yes, they did. They thought they had a protected area, but the franchise company just plopped another one in the neighbourhood. They do not end up going to lawyers because they know it is a losing proposition for them, and the minister knows this. The minister knows that at the end of the day, what are you going to get? You are going to lose two years of your life, and you are not going to get anywhere anyway.

Have you ever tried, Mr. Minister, to enforce a judgment from the Small Claims Court? I mean, talk about an impossibility.

The Acting Chairperson (Mr. Dyck): Order, please. The hour being 6 p.m., committee rise.