Legal restrictions on franchise agreements and the relationship between the parties The Consumer Contracts (Information, Cancellation and Additional Fees) Regulations 2013 (the Consumer Contracts Regulations) contain provisions that are relevant to all franchisors and franchisees dealing with consumers (referred to in the legislation as “traders”) but have a special effect on the protection that consumers have when purchasing goods. or services. is available through a distance selling agent. Communication like the Internet. The Consumer Contracts Regulation requires all traders to provide consumers with certain specific pre-contractual information before concluding a contract (e.g. B on the total cost of the products or services concerned and the terms of payment and delivery). If orders are placed via the Internet or other electronic means, the Merchant must clearly mark the order button to indicate that the order involves a payment obligation (e.B. using words such as “Order with payment obligation”). In the case of distance contracts, in most cases, entrepreneurs must also grant consumers a period of 14 calendar days within which they can terminate the contract. The Consumer Contracts Regulation also includes specific provisions on refunds, returns, delivery and risks, inertial sales and helpline fees, as well as new specific rules for the supply of digital content. The Trading Systems Act 1996 regulates pyramid schemes, and brands wishing to franchise in the UK must structure their franchise agreements in such a way as not to fall within the scope of that Act. To be exempt under the Trading Systems (Exclusion) Regulations 1997, the parties must ensure that: (1) the franchise is a single-tier trading system (with only one level of franchisees below the franchisor) or (2) the franchisor and all franchisees are registered for VAT, or both. Non-competition clauses, including product links or the franchisee`s obligation not to be involved in a similar business, are common in franchise agreements, meaning that franchise agreements are generally considered to have the potential to influence competition – contrary to the principles of Article 101 TFEU and the 1998 Act.
During the term of the franchise agreement, the franchisee may not sell products or services that compete with those of the franchisor. Product obligations are provisions that limit the franchisee to purchase certain products, including those it resells to customers, only from the franchisor or its designated supplier. 9.1 Are there any mandatory local laws that could override the termination rights that would normally be expected in a franchise agreement? The 2019 decision in the case of Alan Bates & Ors v Post Office Ltd18 marked the end of a long-standing and highly controversial dispute between the post office and 550 of its substations. The court held that the contractual relationship between the post office and the postmasters was a relationship agreement in which an obligation of good faith and fair trade was implied. However, the really important part of the post-election decision is what the court called a duty of good faith. In the Yam Seng case, the court stated that a bona fide undertaking was comparable to honesty, but in the case of the position, the court ruled that this meant that the parties had to refrain from any conduct that would be considered commercially unacceptable by reasonable and honest people in the relevant context. The court stressed that it was not enough to be honest. Shareholders of franchisors or franchisees who are tax residents in the UK are required to pay taxes on dividends received (i.e. corporation tax if corporate shareholders and income tax if individual shareholders). Do any laws affect the ongoing relationship between the franchisor and the franchisee after the franchise agreement is concluded? With the exception of the BFA`s requirements, franchisors have no legal or other pre-contractual obligations to disclose relevant facts. In general, the principle of caveat emptor or “buyer`s caution” applies to the pre-contractual phase of the franchisor-franchisee relationship. However, misrepresentation laws apply to the pre-contractual phase of the franchisor-franchisee relationship.
The concept of misrepresentation is enshrined in both the Misrepresentation Act, 1967 and the common law. Are there any regulatory reforms planned or underway that affect franchises? If a franchisor wins a breach of contract claim against a franchisee, it is entitled to damages to put it in the situation it would have been in if the contract had been properly performed by the franchisee. Two elements of damages can be claimed: those which result directly and naturally from the infringement and those which are indirect but which were in the reasonable consideration of the parties at the time of the conclusion of the contract. Types of losses that may be recoverable include the franchisor`s profit from royalties for the remainder of the agreement or until the franchisor can reasonably be expected to appoint a new franchisee; the cost of appointing a new franchisee; loss of profit from sales of products that the franchisee would have purchased; damage to the franchisor`s goodwill or reputation (although this can be very difficult to quantify); the cost of taking over and operating the franchisee`s territory until it can be redeveloped. The amounts of losses available to a party depend on how the underlying agreement was drafted, so as the first point of contact in any dispute, it is imperative to take into account the limitations of liability contained in that agreement (both in terms of the amount and types of losses that can be recovered). However, the BFA`s Code of Ethics requires its members to disclose certain information before entering into franchise agreements, including: There are no “relationships” or other specific laws that govern the day-to-day activities between the franchisor and franchisee once the franchise agreement comes into effect. The Code contains the franchisor`s general obligations with respect to its treatment of the franchisee throughout the term of the franchise agreement. In some Member States, courts do not always recognise the difference between a commercial agent and a franchisee. By applying the law of commercial agencies by analogy, franchisees in some Member States have been able to successfully claim compensation upon the expiry of a franchise agreement. According to this provision, intellectual property rights may be protected by a combination of the franchisee`s contractual obligations and by legal proceedings in the event of infringement. What fees are typically charged under a franchise agreement? The franchise agreement should include “entire agreement” and “non-trust” clauses designed to prevent either party from making a false statement based on pre-sale/pre-contract data. There are no franchise-specific laws in the UK.
However, general applications can be of general importance: at the sectoral level, the survey concludes that, although more systems were added in each category, the strongest growth was recorded in the hotel and restaurant and personal services sector. These two sectors now account for more than 60% of the UK franchise market by volume, up from 40% in 2008. Although growth in the retail sector appears to be relatively stable over time, the survey reminds us that this must be seen in the context of an extremely challenging retail environment, and therefore the growth that has been observed is a positive sign of the state of the UK franchise market. In addition, 93% of franchised units reported profitability, and the closure of a unit due to a business outage was reported at less than 1%, which is low compared to the failure rates of small and medium-sized businesses in general. If payments are made to or from non-UK tax resident companies under a franchise agreement, withholding taxes may be due. Since copyright is automatic once the work is created, franchisors do not need to register their copyright in the UK. Trademarks are protected in the United Kingdom by filing a British trademark with the United Kingdom Intellectual Property Office and in Europe by filing an EU trademark with the European Union Intellectual Property Office. .