on franchises can only be read in tandem with the Companies Act, and that if placed in the proper context, contentious wording of a key provision takes on a completely different meaning than when read on its own.

The first provision of this policy states: "Fee arrangements payable to franchisor -- any fees paid to the franchisor must be spread over the normal consignment purchasing of goods.'' Here the policy prohibits lump sum payments to a company like McDonald's for anything other than the purchase of Big Macs and the chain's other fare. But you can't pay $500,000 up front for the right to open a franchise in Bermuda.

The Royal Gazette quoted McDonald's spokeswoman Ann Connolly from Illinois last January as saying that a franchisee normally pays a total of 12.5 percent of sales to the parent company, which included a four percent service fee and an 8.5 percent rent fee.

A further four percent of sales was normally put toward cooperative advertising, she said, although an exception could be made for an island franchise.

That Grape Bay Ltd. was able to obtain a franchise agreement that controls or gets around the lump sum payments issue, other than for goods obtained, may be a result of companies like McDonald's changing their requirements for franchise operators outside of the US in order to expand overseas. He doubted that they would be so onerous as had been previously required for US operators, said Finance Minister Grant Gibbons.

The second provision of this policy states: "Management Agreement -- The franchisor must not be doing business in Bermuda under the management agreement.'' "Upon application to form a company, a legal opinion must be submitted to the Bermuda Monetary Authority which supports the position that the overseas franchisor will not be doing business in Bermuda (per the Companies Act 1981) under the terms of the proposed management agreement.'' "The opinion should specifically refer to the management (franchise) agreement, which must accompany the application.'' This policy expressly prohibits McDonald's from setting up its own operation here, and provides for a vetting process of the management agreement, which brings into play the Attorney General's Chambers.

The third provision of this policy states: "General -- It can be assumed that the Minister of Finance will not give a licence or a permit should one be required for a franchise operation to do business in Bermuda . This is because most franchises would be in direct competition with other local business. In particular the Minister will not support applications to franchise fast food operations because of the economic circumstances in Bermuda faced by local restaurateurs.'' This appears to be where the confusion arises.

The Oxford dictionary defines the word "franchise'' as a transitive verb as meaning "grant a franchise to''.

Therefore, that last sentence could have very well read, "In particular the Minister will not support applications to grant a franchise to fast food operations because of the economic circumstances in Bermuda faced by local restaurateurs.'' That's at least the interpretation of many people. But it is not the interpretation of Dr. Gibbons and the Government. They say it is because the document must be considered in its entirety and in conjunction with the Companies Act.

The government's view is that the provision refers to foreign companies requiring a licence or permit to do business here, which is not the case with the local company Grape Bay Ltd.

The fourth provision of the present policy clarifies that the "aesthetic argument'' involving fast food franchises is not a Finance Ministry argument, but rather a Tourism concern.

RESTAURANT EAT