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What are the legal requirements for franchises in the UK?
John Pratt writes:
There are absolutely none! The U.K. is in an almost unique position in not regulating franchising. There is a good reason for that. Franchising in the U.K. has, with only a few very minor exceptions, been highly ethical principally as a result of the work of the British Franchise Association (“bfa”).
The bfa, unlike many national franchise associations, is committed to ethical standards and has required its members to comply with its code of ethics which is based on the European Franchise Federation’s code of ethics.
There is, of course, nothing to oblige a franchisor to join the bfa and therefore to comply with its code of ethics, but the great majority of active franchisors in the U.K. are members because it provides networking and educational opportunities for its members. It is also a quality assurance for prospective franchisees who will be reassured by the fact that the franchisor has been vetted by the bfa and approved.
Whilst there are no legal requirements obliging franchisors to make disclosures, to register their franchise with government authorities or to comply with certain obligations aimed at protecting franchisees, nevertheless, common law does provide franchisees with protection because if franchisors provide incorrect information to a prospective franchisee in order to induce that franchisee to enter into a franchise agreement, that could well amount to a misrepresentation claim.
Of course, the franchise agreement will contain obligations on the franchisor which, if the franchisor fails to comply with them could give rise to a breach of contract claim.
To further improve franchisees’ position, the English courts seem to be increasingly prepared to imply good faith obligations into franchise agreements.
John Pratt is senior partner at specialist franchise firm Hamilton Pratt and has advised franchisors for over 25 years.
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