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Unlike in other countries, no specific laws regulate UK franchising. However, as a franchisor, you should be aware of industry standards and best practices. Knowing and adhering to these standards can mitigate the risk of legal disputes and ensure your relationships with franchisees operate soundly. The British Franchise Association’s (BFA) Code of Ethics (Code) is a crucial source of ethical standards in UK franchising. This Code applies to BFA members, but the courts have recognised its significance for franchisors nationwide, whether or not they are a BFA member. This article will explain the BFA’s Code and its implications for franchisors in the UK.
What is the BFA’s Code of Ethics?
The BFA is a regulatory body of British franchising. Its Code sets particular standards for both franchisees and franchisors. As a franchisor, joining a franchise association is a great idea. Membership shows prospective franchisees that you adhere to franchising industry standards and best practices.
The BFA reviews franchisors’ applications and assesses their business models and practices. This is to ensure that their businesses meet the standards set in the Code. Franchise association membership can also allow you access to:
- resources;
- networking opportunities;
- training sessions; and
- support.
What is the Legal Significance of the BFA’s Code of Conduct?
The BFA’s Code sets the standards expected of its franchisor and franchisee members. There are no specific laws in the UK relating to franchising. It is a self-regulating industry. Therefore, franchisors can choose to be members of a franchise association.
However, the BFA has derived these standards from the European Franchise Federation. They are industry-wide best practices relevant not only in the UK but also in further European markets. The UK’s High Court has also recognised the value of the BFA’s Code in setting industry standards. Therefore, the Code is relevant to you whether or not you are a member of the BFA. It sets guidelines for your behaviour and practices as a franchisor.
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The Code’s Standards
The franchising model allows franchisors a significant amount of control. For this reason, much of the Code refers to terms that protect franchisees. It contains many different standards, such as:
- what you should include in the franchise agreement; and
- how the franchise relationship should operate.
By adhering to the Code, you ensure that:
- your business model is viable;
- you run an ethical franchise;
- your franchise agreements are fair; and
- franchisees can negotiate the agreement’s terms with you.
The Code also contains certain obligations for franchisees, including:
- to uphold your brand’s reputation;
- to be honest and transparent with you; and
- to adhere to non-compete or non-disclosure agreements.
Key Aspects of the BFA’s Code
1. You Must Have a Viable Business Model
The BFA expects that its members develop a viable and profitable business concept before franchising. The Code stipulates that prospective franchisors will operate a successful business for at least a year before developing it into a franchise concept. Before establishing full-scale operations, you should conduct a pilot test to check the concept’s viability before developing a franchise network.
2. Intellectual Property Rights
As a franchisor, you must own your brand’s intellectual property or have the right to use it, including trade marks and your business’s name. Not owning your brand’s intellectual property is a bad practice. This is because it increases the risk of legal disputes and can jeopardise your franchise network’s reputation.
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3. Listen to Your Franchisees
You should ask for feedback from your franchisees and keep in regular contact with them. The franchisor-franchisee relationship also requires you to share relevant information with them, such as industry know-how. You are also responsible for training and assisting franchisees for the duration of the franchise agreement.
4. Recruitment Procedures
When seeking new franchisees, you must ensure that your franchise opportunity advertisements are clear and not misleading. During the recruitment process, you should provide franchisees with a copy of the Code so that they are aware of your obligations and their own.
Key Takeaways
There are no specific laws and regulations for UK franchisors. However, the BFA’s Code of Ethics sets various standards and best practices for franchisees and franchisors. This Code applies to the BFA’s members, and membership of this association requires franchisors to meet its standards. However, the Code does have some legal standing in the UK. This is because the High Court recognised it as a standard-setting document for franchisors.
The Code contains various terms, including your rights and obligations as a franchisor and those of your franchisees. Whether you are a member of the BFA or not, you should familiarise yourself with the Code. Additionally, you should ensure you adhere to industry best practices to mitigate risk and create the best chances of franchising success.
If you would like advice about your obligations as a franchisor, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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