Have you heard of the Franchising Code of Ethical Conduct? Developed by the British Franchise Association, the Code promotes ethical, sustainable and credible franchising in the UK. It’s an invaluable resource to help you find trusted franchises and draw up franchise agreements. Here, we give you all you need to know.
Franchising has become a popular way of expanding a business in the modern world. But while everyone has likely heard of it, the word ‘franchising’ still has no official legal definition.
Even more concerning, there is no formal regulatory framework for franchising in the UK and Europe. Franchisors and franchisees are largely in the dark when it comes to maintaining standards. As a result, many have developed a culture of self-regulation.
The absence of clear regulations, however, becomes problematic in the event of a dispute between franchisors and franchisees around the franchise agreement. Interestingly, courts can consider clauses in franchise agreements void if they deem them unreasonable.
When drafting a franchise contract, franchisors and franchisees find it helpful to refer to the Franchising Code of Ethical Conduct. Created by the British Franchise Association (bfa) and member companies, the Code provides guardrails for parties to exercise their rights and fulfill their obligations. It is essential both parties know their obligations from day one.
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Below, we have provided a quick breakdown of the Code and some of the most important information you need to know.
Why the bfa’s Code matters
The Code of Ethical Conduct sets out regulations on what a good franchise should be, promoting ethical franchising and industry credibility. It is based on the code developed by the European Franchise Federation, which was established in 1972 and consists of national franchise associations from across Europe.
The bfa Code is useful for:
- Creating fair franchise agreements: The bfa Code of Ethical Conduct has strict stipulations for franchise agreements. This includes ensuring both parties create and sign the agreement; protecting the industrial and intellectual property rights of the franchisor; and setting terms for contract renewal or termination – should the franchisee wish it. It is a guiding light for anyone drawing up a franchise contract.
- Finding trusted franchises to work with: Any franchise can use the Code as a guideline, but all bfa members must adhere to it. This means following its rules on disciplinary action, complaints and appeals. Additionally, franchises accredited by the bfa must follow the Code of Advertising Practice set out by the Advertising Standards Authority. If they do not uphold these standards, the bfa will no longer endorse them. Entrepreneurs looking for safe-bet, trustworthy franchises to join should look for those associated with the bfa.
If you would like your own business to be officially recognised and accredited, you can approach the bfa directly. Remember, however, you must be able to demonstrate that your franchise is ethical, reliable and ‘franchiseable’. And you must be willing and ready to abide by the Code.
With a positive track record, you can apply for full bfa membership. However, if you are part of a smaller network, or have been operating for a short amount of time, you could think about getting associate membership as well.
Franchisor obligations under the Code
There’s certain standards every franchisee should expect from their franchisor. According to the Code, franchisors are obliged to:
- Be the owner of the business or have legal rights to operate under its trade name
- Have developed a profitable business concept proven over a period of time – in other words, the business must be ‘franchiseable’
- Be willing to support franchisees for the full duration of their time with the company, including providing training schemes and ongoing support in business operations
- Provide all franchisees with a copy of the latest Code, and other up-to-date, accurate information before they enter into a binding agreement
- Inform franchisees of any contract breeches in writing. When managing conflict, franchisors should first allow franchisees to remedy the situation – if they are able or inclined to – before taking further action. This is part of the bfa’s aim to solve disputes fairly, with clear communication and in good faith.
Franchisee obligations under the Code
Within a franchise agreement, franchisees are obligated to:
- Make all reasonable effort to ensure the business is a success and uphold its reputation
- Be open and honest in all communications with the franchisor, providing access to the business premises and records – as long as this is done at a reasonable time
- Present verifiable data on business performance
- Adhere to non-disclosure agreements: It is vital that franchisees do not disclose any business-related or mission-critical information to third parties during or after their time with the business. This enables the business to maintain its expertise and operate successfully.
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Get more familiar with the Code
The above guidelines are just a brief sample of the Franchising Code of Ethics. To view it in full or get more information, visit the British Franchise Association website, which explains each element of the Code in detail.
If you are still uncertain about your rights and obligations – as a franchisor or franchisee – you can also seek out a specialised franchise solicitor. These are experts in the franchise system, able to advise you on everything from franchise agreements to resolving disputes and terminating contracts. The full list of bfa-approved franchise solicitors are available on their website.
In general, the bfa is a useful resource for anyone looking to better understanding the world of franchising – full of credible information on every aspect of the sector. Once you are informed and ready to get started, visit our UK Franchise Directory and find the right options for you.
Sophie Cole, Point Franchise ©