Franchise rules


The franchise rules and requirements that apply to the franchisee and franchisor throughout a franchise relationship are not contained in any specific legislation or regulations. Franchises are covered by the same legal framework as any other business structure in the UK. Beyond these general laws, the franchise industry is only partially self-regulating. The British Franchise Association is a voluntary self-regulating governing body, which provides a ‘Code of Ethical Conduct’ which members should abide by. However, as it is voluntary, not all franchise businesses are members and there are no enforcement mechanisms.

Thus, the source of franchise rules and regulations is the franchise agreement. Whilst this might sound like it does not impose many requirements upon a franchisee, the opposite is typically true. The detailed terms and conditions set out in a franchise agreement provide a prescriptive legal statement of the ongoing rights and responsibilities of both the franchisee and the franchisor.

The franchise agreement sets out rules for the establishment of the franchise, from the payment of fees, to the way in which the franchise premises or equipment is to be fitted out, to the date and method of opening the business.

It also governs the ongoing operations of the franchise, including details as to the way in which the business is to be run.  It imposes substantial ‘management service fees’ on the franchisee in return for the right to use the franchise formula, and for the ongoing support and assistance provided by the franchisor.

In the event that the franchisee wishes to exit the franchise, substantial rules and limitations are placed on when and how the franchisee can exit. In particular, when the franchisee wishes to sell the franchise, the agreement will generally contain provisions affording to the franchisor significant control over the process.

Where conflict arises over terms of the franchise agreement, legal recourse can be gained through the court system, or in mediation or arbitration, with the franchise agreement providing the primary source of the rights and obligations of the parties.

If you would like to obtain legal advice on franchise rules and requirements, Caven can put you in touch with local specialist franchising solicitors free of charge. So, if you have any questions or would like our help in finding local franchising solicitors please call us at 08001 221 2299 or complete the web-form above.

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