What Is Franchise Compliance?
There is no specific franchise legislation in the United Kingdom. It is this reason franchise agreements are pretty lengthy to accommodate eventualities. We have tried to list down some of the issues you should to know if you are thinking about getting into franchising business in the UK.
British Franchise Association (“the BFA”)
BFA plays a vital role in regulating a franchising business and this is important especially in the absence of any franchise specific legislation. The BFA mandates its members, be they franchiser, affiliates or consultants to comply with the Code of Ethics (“Code”) laid down by the BFA. The code requires the franchiser to be in his business for a reasonable amount of time and have all the legal rights to use the intellectual property and trademarks.
The franchiser is required to provide advance disclosure of certain information. Both the parties are expected to employ fairness in their dealings with one another. To be the member of BFA is a voluntary choice. It is a hallmark of accreditation and compliance with the Code is a fair practice in the industry.
Intellectual property rights are the life of the franchise business. Franchise business operates with trademarks, confidential information and knows how that gives it an edge over other business and forms part of its profitable business model. Trademarks are registered in UK under Trademarks Act 1994. Trademarks provide protection against unauthorized use.
Unfair Contract Terms
Franchise agreements contains exemption clause. The exemption clause limits or excludes the liabilities of the franchiser from pre-contractual agreement. For example while supplying projected profit turnover figures. The enforceability of such clause should be read in the light of UCTA. This comes into picture where the franchiser tries is a liability for misrepresentation. Franchise agreements are treated as a standard form of document and hence any exclusion clause will apply only for as long as they are fair and reasonable.
Franchise agreements are between franchiser and the independent business owners at different levels in the production or supply chain. The agreement in some cases has the potential to affect the competition. Especially if they contain territorial restriction, price and other non-complete requirements.
Many franchise agreements may not be of interest to competition legislation since they are assumed as being entered by small or mid-sized enterprise. Hence they are being exempted from competition laws. Broadly three areas are covered by the block exemption and they are price, territory and non- compete obligation.
Many franchise agreements are drafted such that they do not contain provision for EU regulation. However there are provisions in the draft to include changes in the agreement to comply with the EU regulations when applicable.
Data Protection Act 1998 (“DPA”)
DPA governs the processing and handling of data relating to personal information of living and identifiable individuals. Breach in data protection law in handling the data can lead to criminal prosecution or may attract contractual liabilities. In the franchise business both franchisor and franchisee are data controllers are both are liable to see that the DPA law has been taken care off.