Nearly two years ago, independent franchises across Canada (and yours) watched with great interest as Sobeys and seven of its Price Chopper dealers were involved in a court battle. I wrote about this at the Canadian grocery store after spending an afternoon searching Ontario`s court records. The case is not yet closed, but is expected to end soon. 6. Interaction and interdependence of operations. The Board of Directors found that all of the following points indicate an interaction of activity: that franchisees have benefited from the need for Sobeys to create competitive prices; manage store conversions from Safeway stores to Fresco stores at their own expense; establish the initial inventory; and to pass the transactions through the franchise agreement. The Board also found that franchisees have benefited from sobeys, through franchisees, providing pharmacy and lottery services whose profits benefit Sobeys. In addition, the Board of Directors considered that the shareholder agreement was a relevant factor, given that Sobeys, by its structure, retained flexibility to control the franchisees. For all franchisees, there is a delicate balance to be struck when franchisees are controlled in order to protect their business interests. Franchisors are well advised to take into account the lessons learned from this Decision when assessing their legal and business decisions. Since Sobeys has changed its price chopper stores to the FreshCo banner, such a buyout seems logical. Sobeys could easily franchise as FreshCo supermarkets or run them for a while. Best of all, such a solution would mean that neither Sobeys nor Price`s franchisees would be blamed.
The trial would end. 2. Financial control. The Board of Directors found that both the shareholders` agreement and the franchise business agreement contained provisions affecting the franchisees` ability to make financial decisions. For example, the payment of dividends or the taking of debts required Sobeys` agreement in accordance with the shareholders` agreement and employee compensation was limited under the company agreement. The Board also found that Sobeys exercised financial control by: (a) as a wholesaler for franchisees through contracts it negotiated with suppliers; (b) require franchisees to comply with certain pricing policies; and (c) to have the possibility, under the franchise agreement: (i) to require franchisees to consent to it before entering into contracts with third parties; (ii) dictate franchisee hours of operation and (iii) require franchisees to pay for the maintenance, appearance and modifications of the franchise program. . . .