Franchising ethics: The British Franchising Association
Introduction
Net Lawman provides a number of articles on franchising. Links to others are at the end of this one.
This article will be useful reading for anyone thinking about buying a franchise as well as business owners who want to franchise their business. Whichever side you represent, you can gain the upper hand in the franchise negotiation deal by supplying the legal document. There is little statutory intervention in this area which means that your franchise agreement is really very negotiable.
Use a Net Lawman template franchise agreement to ensure you get it right, or simply use our template agreements as a starting point for negotiation. Of course if you are the franchisee, and the franchisor already has a number of franchises up and running, there is less room for negotiation due to the requirement that the agreements should contain the same terms.
There is no statutory law on franchising; however, there is a European Code of Ethics for Franchising, which has been further developed in association with the British Franchise Association and their code of ethical conduct and has now culminated in the British Franchise Association Code of Ethical Conduct. The code ensures that franchising is done fairly.
European code of ethics
The European Franchise Federation, EFF, was constituted in 1972. Its members are national franchise associations or federations established in Europe.
The aims of the EFF are:
· To develop an ongoing unbiased and scientific study of franchising in every respect, and;
· To co-ordinate its members' actions, and to promote of the franchise industry in general.
The EFF comprises a Legal Committee of two lawyers from each national member association or federation and highly qualified in franchise matters and also has a Franchise Arbitration Committee which deals with disputes.
The evolution and the ever growing importance of franchising in the EC economy as well as the EC Block Exemption Regulation for franchise agreements, entered into force on lst February 1989, prompted the EFF to revise its existing Code of Ethics.
Ethical principles
The Franchisor shall:
· Have operated a business concept with success, for a reasonable time and in at least one, pilot unit before starting its franchise network;
· Be the owner, or have legal rights to the use, the network's trade name, trade mark or other distinguishing identification;
· Provide the Individual Franchisee with initial training and continuing commercial and/or technical assistance during the entire life of the agreement.
The franchisee shall:
· Devote its best endeavours to the growth of the franchise business and to the maintenance of the common identity and reputation of the franchise network;
· Supply the Franchisor with data to allow him to assess the performance of the franchise;
· Not disclose to third party the know-how provided by the franchisor.
The ongoing obligations of both parties:
· Parties shall exercise fairness. The franchisor shall give written notice to its franchisees of any contractual breach and, where appropriate, grant reasonable time to remedy default;
· Parties should resolve complaints, grievances and disputes with good faith and goodwill through fair and reasonable direct communication and negotiation.
Recruitment, Advertising and Disclosure
Advertising for the recruitment of franchisees shall be clear and unambiguous. Any publicly available recruitment, advertising and publicity material containing direct or indirect references to future possible results, figure or earnings to be expected by Individual Franchisees, shall be objective.
In order to allow prospective franchisees to enter into a binding document with full knowledge, they shall be given a copy of the present Code of Ethics as well as full and accurate written disclosure of al information material to the franchise relationship, within a reasonable time prior to the execution of the agreement;
The Franchise Agreement
The franchise agreement should comply with the national law, European community law and this Code of Ethics.
The minimum terms of the agreement are:
· The rights granted to the Franchisor;
· The rights granted to the Individual Franchisee;
· The goods and/or services to be provided to the Individual Franchisee;
· The obligations of the Franchisor;
· The obligations of the Individual Franchisee;
· The terms of payment by the Individual Franchisee;
· The duration of the agreement;
· The basis for any renewal of the agreement;
· The terms upon which the Individual Franchisee may sell or transfer the business;
· The Franchisor's right to adapt the franchise system to new or changed methods;
· Provisions for termination of the agreement.
Net Lawman has a number of franchise agreements all of which comply in every aspect mentioned above. They provide a watertight and effective terms and conditions document between the parties.
