Franchise Ethics Specialist Franchise Solicitors Must Abide By

Franchising arrangements are dictated by a certain code of ethics

, these ethics are known by those people franchising out their business and most specialist franchising lawyers. If you want to participate in an franchise arrangement then you may want to clue up on this code.

This article looks at some of the key points of the code of ethics that many specialist solicitors follow when providing franchise legal advice.

In the UK, the code of ethics is based on the code that was developed by the European Franchise Federation. This code has then been interpreted, extended and applied by the British Franchise Association [ BFA]for use in agreements relating to the UK, and all of its member franchise solicitors need to take this into account on any agreement they work on.

Interestingly, the code of ethics describes franchising as involving the marketing of technology, services and goods through collaboration between a franchisor and franchisees. This collaboration must be legally and financially separate and it involves the parent company giving the franchisees the right to use the relevant trade name and 'know how' associated with the business within a framework that should be laid out in the initial agreement.

The code of ethics also states that the parent business must meet certain conditions before it can start trying to recruit franchisees. Your franchise solicitor [if they are a BFA member] will be able to explain this in more detail, but essentially businesses must have already been operating successfully for a reasonable period of time, the owner must have the right to the trade name and intellectual property, and they must be willing to provide franchisees with support and training both initially and for the life of their agreement.

In terms of the franchisees, the code of ethics states that they need to be dedicated to the growth of the business, they need to be willing to supply the franchisor with operating data so they can determine how well they are performing, and they must not disclose the 'know how' of the business to any third parties at any time.

Both parties are also required to act fairly towards each other and, wherever possible, settle disputes with direct communication and negotiation; franchising solicitors will be able to give you more information about the precise requirements and conditions for each party. The code of ethics also makes it clear that any recruitment material must be unambiguous and that franchisees should be chosen according to their capacity to run the business successfully.

All franchise agreements need to comply with the code of ethics, national law and European law. The agreements must also make sure to include certain information, such as the rights of both parties, what they are both agreeing to, the length of the agreement, payment arrangements and provisions for termination of the agreement.

by: Tim Bishop

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