establish a McDonald's restaurant, it has emerged. And Finance Minister Grant Gibbons this week questioned the fairness of refusing Grape Bay's incorporation when there was no policy that discouraged it.

But after decades of Government officials touting a policy against fast food franchises, it has been revealed that no written policy existed in the Ministry when then Finance Minister David Saul last year called for it.

Dr. Gibbons conceded that many people who have read the document that was drafted in January 1995, have incorrectly interpreted the policy.

Perhaps more importantly, he has agreed that the current policy is not up to current standards.

He said yesterday: "This policy is not adequate to this day and age. That is the difficulty the Ministry (of Finance) finds itself in. That is precisely why we have suggested that not only does it need to be looked at, but it must be looked at in the broader context of the pros and cons for Bermuda from franchises in general, including environment and tourism considerations''.

The policy is outlined in a paper entitled Policy Position -- Franchises, compiled in January 1995 by Financial Secretary Peter Hardy, at the request of then Finance Minister David Saul. Mr. Hardy said this week that he drew from various sources in preparing the paper.

And yesterday, Dr. Saul recalled that he was Financial Secretary when a policy document was first prepared in the 1970s after the opening of a Kentucky Fried Chicken business.

He said Bermudians were against fast food franchises for two reasons: "One, because of environmental issues, the signs, garbage, etc. And the other one was the outflows of foreign currency that would result from such legal franchises. Because you had to pay a front fee to get the franchise and then you had to pay annual, quarterly or monthly payments to that international franchise group.

"So a policy was established then that there would be no further fast food franchises allowed. It was administered by the Bermuda Monetary Authority.

There were accommodations on some franchises like Marks & Spencer, although they were put under tight controls by the Bermuda Monetary Authority.

"Right now, you have a local company Grape Bay that doesn't wish to get into a pure franchise agreement with McDonald's. If you look at Four Star Pizza, it is a franchise in the US.

"But if someone sets up a company and asks the BMA if he can have a relationship with an overseas franchise if he doesn't sign a franchise agreement, there is no front payments, and no monthly payments.

"Suppose he simply wants to simply enter into an agreement with that franchise to supply him with supplies for which he will be invoiced. The Monetary Authority doesn't see that as a franchise agreement, but a legal agreement. They don't see that company as a pure franchise.

"Neither Four Star Pizza, nor Grape Bay Ltd. were entering into a franchise agreement, so the Monetary Authority said that was all right.'' Franchise policy wording confusing: Page 18 RESTAURANT EAT