Consumer protection laws also need to be reviewed by franchisees, on a province-by-province basis, to ensure compliance in respect of the services they offer to their customers. The subject of consumer protection is quite complex and franchisors should undertake the diligence required to be able to direct their franchisees to the appropriate sources for compliance.
By way of example, many consumer protection laws regulate motor vehicle repair services and include specific compliance requirements relating to repair estimates and contracts, the posting of signs, returns of defective and/or removed parts, costs of repairs, labour hours and rates, costs of parts, additional charges, customer authorizations and disclosure of the legal name of the service provider. And specific to franchised operations, it is essential for both the franchisee and the franchisor to provide notice to customers that (a) the business is operated by an independent licensee/franchisee and (b) the franchisor is not legally responsible for services provided by the franchisee.
Similarly, since most automotive service centres are required by law to disclose the scope and nature of their product and service warranties—and, by sale of goods legislation, are deemed to offer basic warranties—the connection between the franchisor and the franchisee in respect of warranties needs to be reviewed and disclosed. Some franchisors offer special ‘lifetime warranties’ or brand-name product or service warranties that allow customers to have their warranty claims serviced by any franchised location. Further, programs are required to establish how customers can make their claims and how the cost of warranty servicing is shared between the franchisor, the ‘original’ franchisee and the warranty-servicing franchisee (if different from the original franchisee).
Finally, in today’s age of social media, franchisees and franchisors need to be well-prepared for incidents that could bring disrepute to their brand name by reason of negative publicity associated with either a specific franchised location or the system as a whole.
Many years ago, for example, a significant automotive service franchise business was virtually destroyed following a news report about false and misleading estimates that had been given at one or two franchised locations.
The franchisor should have a business continuity program in place to deal with adverse or even catastrophic publicity if and when it occurs, with a strategy for responding to media reports in a timely and well-informed fashion, so as to minimize negative connotations with its brand.
The evolution of legislation
While the legal and business aspects of operating an automotive service franchise are complex in many respects, they have been implemented in response to the consumer complaints of the past and, thus, to provide better consumer protection today. They must be understood and complied with by franchisee and franchisor alike. And both parties should also have measures in place to become aware of proposed and newly implemented legislation that could affect their operations in the future.
Frank Zaid practised franchise law for 40 years and has appeared as an expert witness in franchise disputes. Today, he is a franchise mediator, arbitrator and ombudsman with ADR Chambers in Toronto, where he chairs a special panel to resolve franchise disputes. He also operates his own franchise support business, Frank Zaid FRANlegal Support Services. For more information, contact him at (416) 322-8300 or (416) 362-8555 or via e-mail at firstname.lastname@example.org or email@example.com.