Franchise agreements subject to European Code of ethics
Nick Strong - Franchise recruitment advisor
The key role of a franchise agreement is to outline and determine the responsibilities and obligations of both franchisor (system owner) and franchisee (local operative of the system).
While there is no specific legislation that governs franchise agreements in the UK and the EU, the British Franchise Association will only accept franchisors as members when their franchise agreement complies with the European Franchise Code of Ethics.
The European Code of Ethics exists to establish what is reasonable and just in franchising, where specific franchise legislation does not exist. The Code of Ethics outlines requirements for franchise agreements to help guide and protect all that fall under EU franchise agreements.
European Code of Ethics for Franchising Agreements
This European Code of Ethics is the up-to-date version of the Code first elaborated in 1972 by the European Franchise Federation (EFF).
Each National Association or Federation member of the EFF has participated in its writing and will ensure its promotions, interpretation and adaptation in its own country.
Proposed adaptations by Member Associations may come as complements to the basic Code, without altering it, and must be approved by the EFF’s governing bodies before being implemented.
This Code of Ethics is meant to be a practical ensemble of essential provisions of fair behaviour for Franchise practitioners in Europe.
For further reference please see:-
http://www.eff-franchise.com/spip.php?rubrique13
http://www.thebfa.org/codeofethics.asp
Tips on franchise agreements
The franchise agreement is crucial. Don’t sign any agreement, or pay any fees or deposit, until you have taken legal advice from an experienced franchise solicitor accredited by the British Franchise Association. Get a specimen contract for them to review.
http://www.thebfa.org/members.asp?category=1&bcid=17
Areas covered by a typical franchise agreement
Term – how long does the franchise last? Will you have the option to renew it, and on what terms?
Territory – what area does your franchise cover? Do you have exclusive rights to sell within it?
Fees – what initial fee will you pay? What percentage of sales revenue will you pay? Will you pay a regular management fee – and if so, what does it cover? Will you have to pay other costs? How are the costs worked out?
Support – how much help will you get starting the business? What continuing support will you get?
Restrictions – what restrictions are there on what you’re allowed to do and how you must run the business?
Exit – what happens if you can’t continue in the business for some reason – perhaps due to ill health? What happens if you want to sell your franchise?
