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What is a Franchise Code of Conduct?

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As a franchisor, being aware of franchise codes of conduct is essential. Discussions about franchising often touch upon a particular code of conduct. In the UK, no laws specifically regulate the franchising industry. However, the primary regulatory bodies within the sector have written franchise codes of conduct. This article will explain what UK franchise associations are, their codes of conduct, and the fundamental values of the codes. 

What Are Franchise Associations?

Within the UK, there are three key franchise associations. These include:

  • the British Franchise Association (BFA);
  • the Quality Franchise Association (QFA); and
  • the Approved Franchise Association (AFA). 

Franchise associations are trade associations founded and funded by people working within the franchise industry. The BFA and AFA vet and approve franchisor members with various levels of experience and expertise. You must meet their standards to be a franchisor member of either of these associations. They assess potential members on aspects such as their business model, the disclosure they provide to franchisees, and their commercial practices. 

The associations provide support, guidance, and education to members. Franchisors are not the only type of member within franchise associations. Other people who may seek membership include franchisees of approved franchisors, suppliers, and professional franchise advisors.  

The associations create a foundation for industry self-regulation. The mission of each of these organisations is to support good practice within UK franchising. They facilitate this by promoting their codes of conduct, accredited membership schemes, education, and dispute resolution mechanisms. 

What Are the Franchise Codes of Conduct?

The codes of conduct aim to provide standards of good practice for the franchise system. By promoting good practice, the associations protect franchisees from franchisors’ potentially harmful practices. 

Being a member of the BFA or AFA demonstrates that your business has met the standards set within its franchising code of conduct. This signals prospective franchisees that a franchise association has screened your business and that the franchise opportunities you advertise are credible. 

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There is not a single code that applies universally across the UK. Instead, each franchise association has its own code of conduct, although the content of each one is very similar. 

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Key Points of the Codes of Conduct

Each code of practice’s overarching value is acting in good faith. The following table outlines some key points the associations have included in their codes of conduct. 

PointExplanation
Transparency Full disclosure about franchise opportunities is a vital aspect of the codes of conduct. Franchisors must be honest in their disclosure documents and communication with franchisees. 
AdvertisingFranchisors must not mislead prospective franchisees when advertising franchise opportunities.  
RecruitmentFranchisors should only recruit people who are suitable to be franchisees. 
Training and support Ethical franchising involves franchisors providing franchisees with adequate training and ongoing support.
Franchise agreementThe franchise agreement and other relevant contracts must be clear, and franchisors must provide them to franchisees in a written format. 

Are the Codes of Conduct Legally Binding?

The franchise codes of conduct are not legally binding. However, courts have judged the practice of a BFA member against the standards set within the BFA’s Code of Conduct. The BFA is a highly respected body within the industry. Therefore, the content of the codes should be used as a guideline to inform your practice. 

Members of the trade associations, such as the BFA, must adhere to the rules set within their codes of conduct. Otherwise, members risk losing their accreditation. It is essential to note the codes may become legally binding if you include a clause requiring adherence to them in your franchise agreement or another contract related to your franchise.

As a franchisor, adhering to the codes of conduct has benefits beyond mitigating the risk of legal implications. You can build trust with franchisees and customers through ethical practice and operating a reputable franchised business. You can also attract prospective franchisees and expand your brand. 

Key Takeaways

Within UK franchising, the franchise codes of conduct play a vital role. They are documents produced by franchise associations that detail ethical standards within the industry. The associations outline how franchisors should conduct themselves and their franchised businesses within these codes. By joining an association and adhering to the codes of conduct, you indicate your commitment to transparency, honesty, and support within franchising.

While not always binding, the codes have legal influence within UK courts. Members of the franchise associations must adhere to the codes to maintain their accreditation. By embracing the ethical standards and guidance set by the franchise associations, you reduce legal risks and build trust with franchisees and customers. 

If you require legal advice about franchise-related matters, LegalVision’s 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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