Minister of Finance the Hon. David Saul made it clear yesterday that barring exceptional cases, Government policy was to exclude franchises -- particularly food franchises.

An outlet such as TGI Fridays would not be allowed, insisted Dr. Saul. Local restaurant owner Mr. John Roach said this week he was considering opening a TGI Fridays on the site of the recently-closed Shutters restaurant on Burnaby Street in Hamilton. But he stated that the restaurant would not be a franchise.

However, Dr. Saul yesterday confirmed that a TGI Fridays restaurant would be turned down on environmental grounds.

Meanwhile, local traders who have negotiated rights to sell products in stores that resemble their foreign counterparts in every detail, were anxious to stress yesterday that they were not strictly franchises.

But, if franchise holders are defined as distributors, who are granted permission to market a manufacturer's product in a setting that conforms with the manufacturer's specification, then there are many examples in Bermuda -- such as The Body Shop, Marks and Spencers, the Rocky Mountain Chocolate Factory and Stefanel.

It would appear that Government has successfully instilled in Bermudians the idea that franchises in Bermuda are taboo. For most, the idea of applying free market principles to franchising conjures up dreaded images of strips of neon lights and hamburger joints on Front Street.

Government took a firm position on franchises after Kentucky Fried Chicken was admitted in 1970.

"The Government took the position that it would look carefully at franchises,'' explained Dr. Saul. This was forcefully reiterated more recently after a request to open a McDonalds outlet created a local furore. Government again stated it would not encourage franchises and franchise agreements.

Aside from concerns about spoiling Hamilton's traditional appearance, a major worry about franchises is the expatriation of profits to a foreign entity.

According to Dr. Saul, Bermuda Monetary Authority has been instructed to reject franchise applications, except under limited conditions.

"If a franchise agreement is seen to assist a small Bermuda company, then permission is given,'' said Dr. Saul. "There is not a carte blanche, which says there will be no franchises, period. If someone has made a request and it looks good for Bermuda and good for a small business, then the case will be reviewed on its merits.'' Mr. Malcolm Williams, Bermuda Monetary Authority managing director, said that every application was assessed according to its merit, and payments made to foreign parents were scrutinised.

"The BMA acts as agents of the Government in that regard,'' he said. "It would all depend on whether the reason for the payment is in line with Government policy. We would have to ensure Government authorisation is given.

"This area of franchises has been a grey area throughout the decade. All individual cases are treated according to their merit. There have been comments by various people about whether it would be advisable or inadvisable for Bermuda to be seen to be encouraging a plethora of household names to set up here.'' Mr. Warren Brown Snr., chairman of Front Street store Archie Brown & Sons, believed that Government should play a less interventionist role.

"I don't think Government should get involved with franchises. It's a free enterprise issue. Franchises are now an unstoppable business trend in the world economy.

"There are different ways of controlling extreme exposure of chains, but franchises are a way of life now. I don't think Government can stop it, although it can control it.'' However, he conceded that Government should control the display signs that franchise companies erect. "I wouldn't want to see Hamilton become a strip of chain stores,'' he said.

Seven years ago he and his daughter, Ms Ellen Brown, won the right to buy and sell the merchandise of The Body Shop. Permission was only granted by The Body Shop because Mr. Brown and his daughter agreed to adhere by the parent's specifications and deck the shop out in a style that conformed with its standards.

Mr. Brown took the initiative to seal an agreement to sell Marks and Spencer merchandise 32 year ago. "I was the first person to buy clothing from Marks & Spencers outside the UK,'' he said. "There was no such thing as a franchise agreement then. We just worked on a wholesale basis.

"The basic reason that Government wants to have some control on franchises is to keep out the fast food chains. There was a outcry when Ward Young attempted to open a McDonald's outlet.

"There is nothing written in black and white about franchises. It is a question of Government looking at the individual terms and conditions.'' Ms Yvonne Cacace, manager and owner of Bermuda's Stefanel clothing store, said her company, Golden Adventures, encountered no problems when incorporating Stefanel.

"I don't operate as a franchise. I buy clothes from Stefanel, but don't pay a franchise fee,'' said Ms Cacace. As Golden Enterprise abided by this condition, the company was given permission to incorporate in Bermuda.

DR. DAVID SAUL -- `cases will be reviewed on their merits.'