Franchising · 9 February 2016

Franchise relationships: Key aspects of UK regulation

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Fair and reliable UK laws make the country attractive to potential franchisors
In his latest column for Business Advice, franchising law expert Andrew Pena hones in on UK franchising regulation to find out why it offers companies a great environment to pilot franchising businesses.

The UK is increasingly becoming one of the most attractive countries for franchisors to begin international expansion. There are a number of reasons for this. The UK is seen as commercially attractive as there are few barriers to entry, as well as highly credible as an international business centre benefiting from a fair and reliable legal system. This latest article focuses on how UK regulation offers a great environment to pilot franchising businesses.

UK franchising regulation

There are no laws specifically regulating franchise agreements in the UK. Parties are generally free to agree all the terms of contracts, save to the extent that laws affecting commercial contracts may apply.

By contrast, many jurisdictions outside the UK specifically regulate franchise relationships. Such regulations can involve additional obligations or restrictions imposed upon franchisors that are not included (or required to be included) in a franchise agreement. These restrictions might include:

? Mandatory cooling-off periods

? Obligations to disclose to franchisees specific information and documents prior to entering into a franchise agreement

? Requirements to register relevant trade marks

? Prohibiting a franchisor from requiring a franchisee to undertake significant capital expenditure during the term of the franchise agreement

? An obligation that the franchisor act in good faith towards its franchisees

? An obligation on the franchisor to notify its franchisee prior to the end of the term as to whether the franchisor agrees to renew the franchise agreement

? An obligation on a franchisor to register and obtain approval of its franchise opportunity marketing materials and details of the individuals who will market the franchising opportunity

? An obligation on the franchisor to allow the sale of a franchise business

? Limitations on the franchisor’s ability to require the purchase of goods and services from nominated suppliers

? Prohibitions on discriminating between franchisees

? Prohibitions on preventing the free associations between franchisees

The areas of law that typically affect franchise agreements are those concerning misrepresentation, competition and restraint on trade. The differences in law between England, Wales, Scotland and Ireland are not substantial, but do require some consideration to accommodate local jurisdictions.

Misrepresentation

Many of the regulations cited above are aimed towards preventing franchisees from entering into a franchise agreement based on false or misleading information provided by a franchisor.

While the UK does not impose disclosure obligations on franchisors prior to entering into a franchise agreement, franchisees do have remedies against a franchisor in circumstances where franchisees are induced into entering the franchise agreement as a result of a misrepresentation like a false representation of fact made by the franchisor.


 
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ABOUT THE EXPERT

Andrew Pena is a commercial litigator who has worked at well-known City practices. Having acted for major international companies and many recognisable high street brands, he now heads up Cubism Law's franchise law practice.

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