BFANEWS
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ew proposals tabled by the British Franchise Association (bfa) are set to substantially strengthen the rules and standards associated with
ethical franchising, in a move described by its chief executive as “one of the biggest reforms for the sector in many years”. With no franchise-specific legislation in the UK, the bfa is the self-regulatory body for the £15billion sector. It has announced a revised code of practice to which its member franchisors must adhere, alongside new arbitration rules.
The right to mandatory arbitration in the case of a dispute between a franchisee and a franchisor is set to be included in legal contracts between the two parties where the franchisor is a bfa member. This would allow disputes to be resolved without going to court, which can prove prohibitively expensive. Arbitration – a binding, more straightforward and usually less costly process – is currently only an option when voluntarily agreed to by all signatories of a franchise contract.
The move comes in conjunction with
a revised European Code of Ethics for franchising, the guidelines and best practice that franchisors must adhere to and which are referred to in disputes. Updates to the code, designed to be adapted by national associations to their domestic markets, include strengthened commitments from franchisors on their internet sales policies, brand development and network protection. It also requires franchisees to clarify their independence and responsibility for their customers. Pip Wilkins, the bfa’s chief executive, commented: “These developments significantly fortify the standards practised by the country’s
best franchisors. Self-regulation works very well in the sector, maintaining lower costs for individuals looking to invest in a franchise – but it’s crucial that the self-regulatory set-up has the power to protect the interests of all stakeholders fairly and equitably. “Considering the balance involved in the franchisee-franchisor relationship, in the rare instances of serious contract disputes, mandatory arbitration addresses concerns that resolving such matters through the courts favours those with deeper pockets. With a number of different options depending on the scale of any dispute, this will prove quicker and more cost-effective for all parties. “Our proposals strike the right balance between individual business owners and franchisors who must protect their brand and wider network for the benefit of their franchisees. It’s a fundamental change, demonstrating once again that accredited, ethical operators place fairness and the success of their franchisees at the heart of their operations.”
The arbitration proposals cover the handling of small claims as well as more complex cases, including cross-border disputes. They cater to the UK’s diverse franchisee-owned businesses, which range from home-based owner- operators to multi-million-pound companies employing thousands.
Nigel Jones QC, a national expert in
commercial litigation, has been consulting with a working group of franchisors, legal advisers and the bfa’s compliance team. The plans would see the bfa, which includes franchisors, franchisees and professional advisers among its members, become an arbitral body, ensuring properly qualified and experienced franchising knowledge is at the heart of adjudications. The proposals, now out for consultation,
follow discussions earlier this year between the bfa and the then-Department for Business, Innovation and Skills on the government’s pubs code legislation, which came into force in July. Simon Bartholomew, the bfa chair, explained: “Current bfa practices were praised, but it was also clear that self-regulation in franchising required greater teeth. We listened carefully to that message and have
“Our proposals strike the right balance between individual business owners and franchisors who must protect their brand and wider network for the benefit of their franchisees”
acted quickly to do just that, ensuring there is no doubt as to how seriously the bfa takes its regulatory responsibilities to all parties in franchising. “Crucially, by inserting mandatory arbitration clauses in the legal agreement between franchisors and franchisees, companies cannot simply opt out of their obligations by leaving membership of the bfa.”
Pip concluded: “Serious disputes are uncommon thanks to the standards represented by British franchisors, which are truly world class. Franchisors and franchisees can have confidence that, when they join an accredited bfa franchise, their rights are properly protected.” n
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