Fieldfisher LLP

London

Fieldfisher is a full-service European law firm with offices in Brussels, Hamburg and London. With 151 partners, over 225 other lawyers and nearly 300 support staff, we assist a wide range of international clients, advising across a full range of legal issues.

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Updates

Franchising

Managing supply chain risk in franchise systems – proposed changes to insolvency regime
United Kingdom | 11 June 2019

Against the backdrop of a number of high-profile business failures in the UK retail sector, the government has issued a report on the insolvency regime, which will affect the operation of termination rights in supply agreements. This article considers the proposals and provides a best practice recommendation for recovering goods in the possession of a franchisee once they have entered some form of insolvency protection.

Be careful of 'non-reliance' clauses in franchise agreements
United Kingdom | 02 April 2019

In a recent Court of Appeal case, a landlord was unsuccessful in its appeal against a first-instance decision that a 'non-reliance' clause in a lease had attempted to exclude liability for misrepresentation. The decision, which will have ramifications for franchise agreements, demonstrates that such clauses must be fair and reasonable and have regard to the circumstances which were or ought reasonably to have been known to or contemplated by the parties when the contract was made.

Legalities of franchising in the United Kingdom
United Kingdom | 05 February 2019

Franchisors expanding into the United Kingdom need a thorough knowledge of any UK rules and regulations which may affect them, particularly in a post-Brexit Britain. Understanding the risks and issues and managing those risks through effective structuring and enforceable legal contracts will enable international franchisors to reap the rewards of doing business in one of Europe's largest and most dynamic markets.

Misrepresentation in franchising – important lessons from recent High Court case
United Kingdom | 16 October 2018

Four former Vision Express franchisees were recently successful in their claim against their franchisor, in which they alleged that they had been induced to enter into their franchise agreements on the basis of false information provided by a Vision Express employee. The case highlights the importance of ensuring that a franchisor's employees stay on message during the sales process and information which is provided to prospective franchisees is scrutinised to ensure its accuracy and relevance to the investment.

Joint venture franchises: the whys and wherefores
International | 21 August 2018

Franchising provides a flexible model for growth or re-engineering, with a variety of structures to meet different needs. Of all of the structures, the joint venture franchise is the least understood and most likely to cause difficulties if not structured correctly. In order to understand why this is so, it is necessary to consider the rationale for using the joint venture model and the manner in which such a relationship should be structured.

Don't forget to renew those vows – the franchise marriage
United Kingdom | 26 June 2018

Franchise relationships are rarely life-long commitments; most will be for a fixed term with a right to renew. The renewal process provides an opportunity for both parties to re-assess and recalibrate the relationship, as well as to settle any issues before either renewing their vows or deciding to go their separate ways. This all makes good commercial and legal sense; however, it is surprisingly common that the renewal process is not always followed.

Don't count your chickens before they hatch – takeaways from KFC's supply chain issues
United Kingdom | 01 May 2018

The recent KFC chicken supply crisis highlights the importance of supply chain management and illustrates how parties that rely on the functioning of a supply chain must protect themselves from a contractual and legal perspective. It also offers franchise businesses an opportunity to review the management and procurement of their supply chains, as well as the terms which govern their upstream relationships with third-party manufacturers and suppliers and their downstream relationships with franchisees.

Five cases from 2017 and what franchise businesses can learn from them
United Kingdom | 20 February 2018

The year 2017 was relatively quiet for franchise disputes in the English courts. Nevertheless, five cases involving franchise and distribution relationships provide some lessons for businesses. They highlight, among other things, the need for clear contractual provisions over ownership of customer data and the importance of businesses checking whether there are prior rights when seeking to register their mark.

Autumn Budget 2017 – what does it mean for franchising?
United Kingdom | 12 December 2017

Chancellor of the Exchequer Philip Hammond recently delivered the Autumn 2017 Budget, the first budget in the new annual tax policy-making cycle. Although there were no radical policy changes, some changes will affect the UK franchise business sector, particularly with regard to the tax treatment of royalties, corporate tax and the digital economy, environmental tax, value added tax and business rates.

Franchising and the gig economy – risks and rewards
United Kingdom | 19 September 2017

A number of businesses which franchise will interact with the gig economy, particularly those which operate with a low entry threshold, such as contract cleaning and other service-based franchises. Both franchisors and franchisees in these sectors may have individuals working for them in this capacity, so they must be aware of existing issues and the regulations that will likely be introduced.

New payment practices regulations and the implications for franchise businesses
United Kingdom | 11 July 2017

The Payment Practices and Performance Regulations 2017 require large UK businesses to report publicly twice yearly on their payment practices and performance. Large franchisors must ensure that they comply with this new regime. For franchise businesses which fall below the reporting threshold, the regulations are good news, as they are designed to improve and promote transparency and fairness in supply chain management.

New Code of Ethics for Franchising – but how much is new?
United Kingdom | 09 May 2017

The European Franchise Federation (EFF) recently adopted a new version of the European Code of Ethics for Franchising. The updated code aims to address some of the perceived imbalances and inequities in the franchise relationship and bring self-regulation into the digital age. However, although the British Franchise Association's (BFA's) interpretation of the code may include some variations from the EFF's text, much of the BFA's existing code and its practices are already in line with these updates.

Preparing for Brexit: top five considerations for franchisors in 2017
United Kingdom | 28 February 2017

Recent events have given the first real insight into the Brexit process. Franchise businesses should start preparing for the potential impact of Brexit by auditing their IP rights in the European Union and assessing their key contractual relationships with suppliers and franchisees. Preparations for the General Data Protection Regulation should continue and a watchful eye should be kept on events as they unfold.

Bad hair day: High Court enforces restrictive covenants against former hair salon franchisee
United Kingdom | 29 November 2016

The High Court recently considered whether two restrictive covenants relating to non-solicitation and non-competition imposed by an individual seller of a hair salon franchise in a share purchase agreement were enforceable. The judgment serves as a useful and informative discussion on a number of legal principles, such as contractual interpretation, restraint of trade and the enforceability of restrictive covenants.

Consumer credit and franchising: are your franchise agreements compliant?
United Kingdom | 16 August 2016

Many franchise systems require franchisees to use specific types of equipment. In order to keep start-up costs to a minimum and enable franchisees to focus their resources on delivering the required products and services, franchisors might make the equipment available under a hire arrangement. However, franchisors must bear in mind that this activity may be regulated by the consumer credit regulatory regime and that the consequences of non-compliance can be severe.

Changes to penalty clauses rule: implications for franchising
United Kingdom | 01 March 2016

In a recent landmark decision, the Supreme Court considered the long-established principles underlying the law relating to contractual penalty clauses. The judgment sets out a new, progressive test for determining whether a contractual provision will be considered penal (and therefore unenforceable), and has major implications for drafting, negotiating and enforcing English law franchise agreements.

Good news for franchisors: proposed reform of energy tax and reporting schemes
United Kingdom | 01 December 2015

The government recently published a consultation regarding the reform of the energy tax and reporting schemes in the United Kingdom. One key proposal is to abolish the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) and the climate change levy in favour of a single consumption tax. This will be of interest to UK franchisors, whose networks may be subject to the CRC.

Franchisors beware: standard-form limitations of liability under Unfair Contract Terms Act
United Kingdom | 22 September 2015

The High Court recently called into question the reliability of exclusion clauses in standard-form business-to-business contracts by applying the Unfair Contract Terms Act. The ruling serves as a timely reminder to franchisors that reliance on these types of exclusion and limitation cannot be taken for granted and that their enforceability will ultimately be judged against the Unfair Contract Terms Act 'reasonableness' test.

Being part of the crowd: mini-bonds and crowdfunding for franchise growth
United Kingdom | 14 July 2015

Restricted access to traditional sources of funding in recent years has seen a growth in alternative finance sources for new franchise businesses and ventures – in particular, mini-bonds and crowdfunding. These offer the franchise sector a real opportunity for growth, but it is important that both the franchisor and franchisee appreciate how these alternative financings work and the potential consequences of using them.

Construction of clause defining term of franchise agreement
United Kingdom | 12 May 2015

A recent Court of Appeal case regarding the termination of a franchise agreement highlights the importance of ensuring that franchise agreements, as well as any updates or amendments to them, are properly documented. In particular, lengthy common law franchise agreements require careful drafting and review to ensure that the insertion of a new clause does not contradict other standard provisions.

Good faith in franchising – where are we now?
United Kingdom | 03 March 2015

A number of recent cases have reignited the debate over whether English law recognises a general duty of good faith in commercial contracts, including franchise agreements. This update considers the line taken by the courts in these cases, starting with Yam Seng Pte Limited v International Trade Corporation and concluding with the first post-Yam Seng case for good faith in the context of franchising.

Competition authorities gear up to scrutinise franchise networks
United Kingdom | 04 November 2014

The 2013 decision of the Competition and Markets Authority (CMA) to fine Mercedes-Benz and five of its dealers over £2.8 million for infringing UK competition law serves as a reminder that franchisors and their networks may infringe the competition rules. The level of the fine imposed also demonstrates that the CMA is paying closer attention to the activities of small and medium-sized enterprises.

Restrictive covenants in franchise agreements
United Kingdom | 14 October 2014

Restrictive covenants are common in franchise agreements, seeking to protect goodwill and customer relationships by limiting the licensee's right to operate a competing business. Two recent cases in the English courts have considered the enforceability of restrictive covenants. This update considers the background of restrictive covenants in the context of franchising and discusses the implications of both judgments.

New consumer protection rights – is your franchise compliant?
United Kingdom | 22 July 2014

In a bid to increase consumers' awareness of their rights and provide greater protection, new regulations recently entered into force which implement certain elements of the EU Consumer Rights Directive. Franchisors need to ensure that their legal compliance programmes and those of their franchisees, including any related consumer terms and conditions, are in line with the revised requirements.

Running a legally compliant advertising campaign in a franchise network
United Kingdom | 18 February 2014

Franchisors can reap significant benefits from a successful advertising campaign – in terms of both attracting potential franchisees and gaining new customers or increased sales. However, a poorly conceived or executed campaign can not only reduce goodwill, but also prove costly to remedy. Therefore, it is important to ensure that marketing campaigns comply with relevant advertising laws and regulations.

Franchise agreements and the duty of good faith: is the genie out of the bottle?
United Kingdom | 24 September 2013

Judgments in three recent cases have reignited the debate over whether English law recognises a general duty of good faith in commercial contracts, including franchise agreements. Franchisors and distributors should be aware of these developments and take caution before exercising contractual discretion, while bearing in mind that their longer-term relational contracts may be held to a high standard of performance, including a duty to disclose.