Franchising Comparative Guide – Corporate/Commercial Law

1 Legal and enforcement framework

1.1 Which legislative and regulatory provisions govern franchising in your jurisdiction?

There are no franchise-specific laws or regulations in the United Kingdom. Franchising is regulated by general commercial law and competition law.

1.2 Do they apply to foreign franchisors entering your jurisdiction or only to domestic franchises?

They apply to both foreign and UK franchises.

1.3 Do any special regimes apply in specific sectors?

No.

1.4 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

As there are no franchise-specific laws, there are no bodies responsible for enforcing them. Competition law is enforced by Competition and Markets Authority.

1.5 What is the regulator’s general approach in regulating the franchise sector?

Not applicable.

1.6 Are there any trade associations for the franchise sector? If so, what are the conditions for membership? What are the commercial implications of not being a member?

The British Franchise Association is the established trade association for franchising in the United Kingdom. It is a member of the European Franchising Association (EFA) and its Code of Ethics is based on that of the EFA.

2 Franchise market

2.1 How mature is the franchise sector in your jurisdiction?

It is very well established, dating back to the 1960s.

The latest British Franchise Association (BFA) and NatWest Survey (2018) states that the franchise sector contributes £17.2 billion to the UK economy and employs 710,000 people. It identifies personal services, hotel and catering, along with store retailing, as the biggest growth areas. Although this is now somewhat old data, the general trend seems to prevail.

The BFA figures do not include the number for traditionally non-franchise corporations that use franchising as a key part of their international strategy, such as Marks & Spencer; or the numerous independent schools that have used franchising structures to establish themselves abroad, such as Westminster, Wellington and Dulwich. The total contribution of franchising to the national economy is therefore probably significantly higher than the BFA/NatWest Survey suggests.

2.2 In which sectors is franchising most common?

Franchising is well established in the food and beverage, retail and hotel and leisure sectors. It is also well established in the service sector. In recent years, it has also been used in the healthcare and education sectors.

2.3 Who are the biggest and most successful franchisors in your jurisdiction? How are they typically structured?

All of the long-established franchise brands – such as McDonalds, Burger King, Domino’s, Pizza Hut, Papa John’s, Nando’s, KFC and Costa – are well established in the United Kingdom. They are all successful and have a healthy market share.

Service franchisors – such as Neighborly, Chips Away and DynoRod – are also very successful.

The majority use a unit franchise approach. Multiple franchisees are common. Many of these have a portfolio of different franchise brands. Regional franchises and sub-franchises are not commonly used.

3 Franchising models

3.1 Is master franchising or the development model most common in your jurisdiction?

This depends on the nature of the business. Most foreign food and beverage and retail franchises tend to use a master franchise structure, although those that require significant investment (eg, TGI Fridays) tend to use a development model.

In hotel and leisure, the master franchise model is most common.

3.2 What other models of franchising are commonly used in your jurisdiction?

Multi-unit franchising and multi-unit multi-brand operators (MUMBOs) are common in the food and beverage sector in particular.

3.3 What are the potential advantages and disadvantages of these different models?

MUMBOs deliver great experience and expertise in the roll-out of franchised concepts. They have their own infrastructure which specialises in implementing and rolling out established franchise concepts in the United Kingdom. They often place a portfolio of brands in close proximity to each other and so increase their efficiency. The downside can be that they have significant bargaining power and are not solely focused on a single franchise brand.

3.4 What specific considerations should be borne in mind in the case of cross-border franchising into your jurisdiction?

The United Kingdom is a common law jurisdiction and so it is important that franchise agreements are drafted appropriately. Civil law franchise agreements are generally not appropriate and need a good deal of amendment before they are fit to use in the United Kingdom.

Scotland and Northern Ireland have slightly different legal systems.

4 Definitions and scope of application

4.1 How is ‘franchising’ defined in your jurisdiction?

There is no formal legal definition of a ‘franchise’ under English law.

4.2 What are the key requirements that apply to franchising? Is pre-contractual disclosure required? Is registration of documentation required? Are mandatory terms imposed?

Subject to the Trading Schemes Act mentioned below, there is no requirement for pre-contractual disclosure or for registration. There are no mandatory provisions that must be included in franchise agreements. Multi-level franchising is usually caught by the Trading Schemes Act. This requires a formal approach to the drafting of the agreement and various warnings must be included. This requirement is generally avoided by requiring all franchisees to be registered for value added tax – an exemption that is made available by a statutory instrument issued under the act.

4.3 What specific activities (if any) are prohibited under the franchising laws and regulations? What are the potential consequences of breach?

No answer submitted for this question.

5 Initial steps

5.1 Are there any restrictions on foreign franchisors entering your jurisdiction?

No.

5.2 What is the most common structure adopted by foreign franchisors entering your jurisdiction?

Master franchise and development structures.

5.3 What requirements or restrictions apply with regard to the selection and recruitment of franchisees?

None.

5.4 Are franchisees subject to any legal obligations when purchasing a franchise?

No.

6 Disclosure and due diligence

6.1 What pre-contractual disclosure requirements apply to franchisors in your jurisdiction?

None.

6.2 What formal, substantive and procedural requirements apply with regard to the disclosure document in your jurisdiction?

None.

6.3 What pre-contractual disclosure requirements apply to franchisees in your jurisdiction?

None.

6.4 What are the consequences of any breach of the pre-contractual disclosure requirements?

Not applicable, but misrepresentations can lead to the franchisee having the right to withdraw from the franchise agreement in certain circumstances.

6.5 What other due diligence should the parties undertake before entering into a franchise agreement?

None is required by law.

6.6 Are there any restrictions imposed upon franchise brokers in your jurisdiction?

No.

7 Franchise agreement

7.1 What formal, substantive and procedural requirements apply with regard to the franchise agreement in your jurisdiction? Are there any mandatory terms? What terms are typically included in the agreement?

None.

7.2 Do any specific requirements apply regarding the governing law or jurisdiction of the franchise agreement?

No.

7.3 Does the franchisor have any mandatory rights and obligations under the franchise agreement?

No.

7.4 Does the franchisee have any mandatory rights and obligations under the franchise agreement

No.

7.5 What restrictions can the franchisor impose on the franchisee’s activities under the terms of the franchise agreement (eg, purchasing requirements, non-compete obligations, exclusivity, price control)?

Subject to competition law issues, there are no such restrictions.

7.6 Is there a duty of good faith imposed upon the franchisor and franchisee?

Although there is no historic obligation of good faith in the United Kingdom, recent jurisprudence has developed this area of law and it is now of great relevance to franchising in the United Kingdom.

Yam Seng PTE Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB) concluded that ‘good faith’ in the sense of honesty should be implied into commercial agreements which are relationship based and which require ongoing communication and cooperation between the parties, singling out “some joint ventures, franchise and distribution agreements”– or more generally what the judge called “relational agreements” – as examples of agreements where implied good faith was appropriate. The judge held that good faith is recognised in most civil law systems and many US states, and is “gaining ground” in Canada and Australia; and that English law would be “swimming against the tide” if it resisted it. He further held that good faith simply gives effect to the “presumed intention” of the parties: implying a term of honesty reflects the shared values and norms of the parties.

In the High Court case of Emirates Trading Agency Llc v Prime Mineral Exports Private Limited, the judge described the Yam Seng judgment as “masterly” and approved the reasoning on the circumstances in which a term of good faith could be implied.

There have been several other supportive cases since then, the most notable of which is Carewatch Services Ltd v Focus Caring Services Ltd [2014] EWHC 2313 (Ch). This was the first case in which the Yam Seng principles were considered in a franchise. The defendant franchisee tried unsuccessfully to argue that (among other alleged implied terms) the franchise agreement contained an implied term that the parties would conduct themselves in “good faith and/or deal with each other fairly and in particular not in a manner that would damage each other’s business interests”.

The judge in Carewatch did not regard Yam Seng as authority for the proposition that there is a general obligation of good faith implied into all commercial agreements, or that there is some sort of positive obligation implied that a party to a contract should subordinate its own commercial interests to those of the other contracting party.

The Carewatch case illustrates that the Yam Seng principles will be applicable only in the right case and on the right facts. However, it is clear that a standard of good faith is taking shape under English commercial contract law, as shown by the High Court case (endorsed by the Court of Appeal) of Bates v Post Office.

7.7 What are the parties’ rights and obligations in relation to renewal of the franchise agreement, and what is the process for renewal?

This is up to the parties to agree.

7.8 What formal, substantive and procedural requirements apply with regard to termination of the franchise agreement in your jurisdiction?

This is up to the parties to agree.

7.9 Are there any restrictions on repatriating moneys out of your jurisdictions?

No.

7.10 Are there any withholding taxes that apply to franchising in your jurisdiction?

The impact of withholding tax depends on any applicable double taxation treaties between the United Kingdom and individual foreign jurisdictions.

8 Operational standards

8.1 What legal status does the operations manual have in your jurisdiction?

This depends on how the franchise agreement is drafted. It can be expressly included as a term of the agreement.

8.2 How can the franchisor ensure compliance with its operational standards during the term of the franchise agreement?

Appropriate drafting of the franchise agreement is essential.

8.3 Can the franchisor make unilateral changes to its operational standards during the term of the franchise agreement?

It can make such changes if there is an express provision in the franchise agreement stating that the franchisor can unilaterally change the operating standards; otherwise, this will not be permitted.

9 Intellectual property

9.1 How are brands protected in your jurisdiction and what specific implications does this have in the franchising context?

To protect the franchisor’s brand, it is important that the franchisor’s trademarks and domain names are correctly registered.

For UK trademarks, applications are made to the UK Intellectual Property Office (UKIPO). For franchisors looking at additional expansion in Europe, it is advisable to obtain (depending on the precise European markets that a franchisor is looking to promote and provide its goods and services in) an EU trademark (EUTM), which provides trademark protection in each EU member state. An EUTM application is made to the EU IP Office (EUIPO) in Alicante, Spain. Alternatively, an international registration can be applied for (specifying the individual countries in which it is desired to protect the trademarks) through the World Intellectual Property Organization (WIPO) under the Madrid Protocol. In light of Brexit, any franchisor that has a pending EUTM application should now register a separate UK trademark.

The franchisor will need to determine which of its goods and services should be subject to registered trademark rights for the purposes of the franchise business and provide a description of each. It is often advisable to seek the advice of a specialist trademark solicitor when preparing the trademark application, in particular regarding which goods and services should be included in the trademark specification. For UK and EU trademarks registered with the UKIPO and the EUIPO respectively, the classification system is divided into different classes, with goods in Classes 1 to 34 and services in Classes 35 to 45.

It is important to ensure that the franchisor’s registered trademark specifications are sufficiently broad to cover all goods and services currently offered by the franchise business, to ensure that no other entity can use identical or similar trademarks in relation to identical or similar goods and services, thus causing the consumers of the franchise business to be confused as to the origin of the goods and services being offered to them. The trademark specification should also cover goods and services that the franchise business might be looking to expand into in the future and thus not limit the direction of the franchise business.

In relation to domain names, as with the searches, there is no centralised system for domain name registration; therefore, registration of a domain name is carried out through a registrar. There are a large number of registrars and the choice of registrar will be determined by price, reputation for reliability and other services offered, such as website hosting and domain name portfolio management. A domain name is registered for a set period (eg, two years) and will have to be renewed once that period is up.

With regard to enforcement for registered trademarks, if cease-and-desist style letters fail to resolve the issue, the franchisor can seek injunctive relief to stop the infringing use by the franchisee (or third party) together with a claim for damages or an account of profits unlawfully made by the franchisee. In determining whether injunctive relief should be granted, the court will have regard to the balance of convenience between the parties’ interests and the prospect of unquantifiable or irreversible harm (or both).

With unregistered trademarks, a claim can be brought under the common law for the tort of passing off. The franchisor will be required to establish that:

• it has goodwill in its unregistered marks;
• the franchisee has made misrepresentations to customers or prospective customers that amount to a false imitation of the franchisor’s branded goods or services; and
• as a consequence of the franchisee’s actions, the franchisor has suffered loss (ie, loss or diversion of business).

As passing-off actions tend to be more complex and costly than relatively simple trademark infringement actions, well-advised franchisors tend to invest in a brand protection (including searches) and registration programme at the outset.

9.2 How are other intellectual assets of the franchisor (eg, know-how, trade secrets) protected in your jurisdiction and what specific implications does this have in the franchising context?

Know-how must be protected contractually. There is no specific trade secrets law.

In respect of domain name actions, proceedings can be initiated against cybersquatters and others that infringe trademarks through use of a domain name. The relevant rules and procedure differ depending on the type of domain name. For example, disputes over ‘.com’, ‘.net’ and ‘.org’ domain names are governed by the Internet Corporation for Assigned Names and Numbers Uniform Domain Name Dispute Resolution Policy (UDRP); while disputes over ‘.co.uk’ domain names are governed by the Nominet Dispute Resolution Service policy. Disputes under the UDRP are heard by a number of tribunals, such as WIPO.

Disputes in relation to UK domain names are heard by the Nominet Dispute Resolution Service. Domain name dispute resolution proceedings are generally simple and low cost. Proceedings are conducted on paper and hearings are extremely rare.

With regard to the protection of IP rights such as copyright and items such as know-how and confidential information, much as with trademarks, the franchisor’s enforcement options will initially start with correspondence between the franchisor’s and franchisee’s legal advisers, which, if unsuccessful, may result in an application for an injunction by the franchisor and, depending on the nature of the franchisee’s conduct, a subsequent court-based trial to determine the franchisor’s possible remedies.

10 Employment

10.1 What is the applicable employment regime in your jurisdiction and what specific implications does this have in the franchising context?

Under English law, in a genuine franchisor-franchisee relationship, franchisees are not and cannot be treated by the courts as employees.

10.2 Can franchisees be deemed to be employees of their franchisor?

No.

11 Competition

11.1 What is the applicable competition regime in your jurisdiction and what specific implications does this have in the franchising context?

Franchising is regulated by the Competition Act, which is based on pre-Brexit EU competition law. Pre-Brexit case law thus still applies in the United Kingdom, until expressly determined otherwise by the UK legislature or judiciary. The Competition (Amendment etc) (EU Exit) Regulations 2019 (SI 2019 No 93) made legislative revisions adapting the EU competition regulations to become a set of domestic competition regulations. It revoked the EU procedural regulations and revised the substantive regulations including block exemptions by removing specific EU or inter-state references.

Article 101 of the Treaty on the Functioning of the European Union (TFEU) continues to apply post-Brexit to agreements or conduct of UK businesses that have an effect within the European Union, in much the same way as agreements or conduct of US and Asian businesses are currently subject to EU competition law where their agreements or conduct affect EU markets.

The substance of UK competition law is very similar to that of EU competition law. Section 60 of the Competition Act 1998, which required UK competition rules to be interpreted in a manner consistent with competition case law of the Court of Justice of the European Union (CJEU), was revoked and replaced by Section 60A with effect from Brexit. Section 60A merely required the Competition and Markets Authority and courts to avoid inconsistency between their decisions and EU law and the decisions of the CJEU before exit day.

The Competition (Amendment etc) (EU Exit) Regulations has retained the block exemptions with their then current expiry date in adapted form, removing specifically EU references. There are therefore ‘retained exemptions’ from domestic prohibitions so that agreements that currently benefit from such parallel exemption will continue to benefit from a retained exemption in the United Kingdom. Since the end of the transition period, there has been a greater chance of parallel investigations by UK and EU authorities.

As the UK authorities are no longer required to apply EU law, the UK government could potentially decide to diverge more significantly. The equivalent to the Vertical Restraints Block Exemption remains under UK law. The Competition Amendment (EU Exit) Regulations 2019 (‘the Amendment Regulation’) introduced every provision of the current block exemption regulations by removing any reference to the EU or internal market. Post-Brexit transition, the retained exemptions will operate as exemptions from domestic competition law prohibitions for as long as they remain in force.

Section 3 of Part 2 of the Amendment Regulation imports the meaning of ‘block exemptions’ from Article 101 of the TFEU, and therefore provides that the Chapter 1 prohibition does not apply to ‘agreements or concerted practices’ entered into by undertakings operating at different levels of the production or distribution chain. Key points to note are as follows:

• The exemption is available only to suppliers with a market share of less than 30%;
• It applies to both exclusive and non-exclusive arrangements;
• Services and goods are included;
• Multi-party agreements are covered;
• Some vertical agreements between competitors at the same level will be exempt; and
• Suppliers may impose maximum price restrictions on buyers (but not minimum price restrictions).

12 E-commerce

12.1 How is e-commerce regulated in your jurisdiction and what specific implications does this have in the franchising context? Can franchisees be prohibited from using e-commerce in their businesses?

UK competition law reflects that of the European Union and as a result very few restrictions are allowed on the right of franchisees to use e-commerce.

13 Consumer protection

13.1 What consumer protection measures are applicable in your jurisdiction and what specific implications do these have in the franchising context?

Franchisees are not seen as consumers and therefore the consumer protection laws have no impact on the recruitment of franchisees in the United Kingdom. Notwithstanding this, it is important for franchisors to be fully aware of consumer-facing laws, as these will nevertheless have an impact on the franchisor, whether dealing with consumers directly or through its franchisees.

A franchisor will need to ensure there are suitable provisions in the franchise agreement requiring its franchisees to comply with all consumer protection legislation.

The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (‘Consumer Contracts Regulations’) contain provisions that will be relevant to all franchisors and franchisees that deal with consumers (referred to in the legislation as ‘traders’). These will have a particular effect on the protections available to consumers when they purchase goods or services using a means of distance communication such as the Internet. The Consumer Contracts Regulations require all traders to provide consumers with certain specific pre-contractual information prior to entering into any contract (eg, on the total costs of the relevant products or services, and the arrangements for payment and delivery). Where orders are placed using the Internet or other electronic means, the trader must clearly label the order button to indicate that placing the order entails an obligation to pay (eg, by using words such as “order with obligation to pay”). For distance contracts, traders in most circumstances must also offer consumers a period of 14 calendar days in which they can cancel the contract. The Consumer Contracts Regulations also contain specific provisions governing refunds, returning goods, delivery and risk, inertia selling and helpline charges; and introduced specific new rules on the supply of digital content.

A large proportion of domestic consumer law was codified under the Consumer Rights Act 2015. This act is a complex piece of legislation, but key provisions include the following:

• a fairness test applicable to most terms of business-to-consumer (B2C) contracts which, if failed, results in the infringing term being unenforceable against the consumer;
• a transparency test that requires all terms of B2C contracts to be in plain and intelligible language, failing which a court will take the most consumer-friendly interpretation of the term at issue;
• implied warranties in all B2C contracts that vary depending on whether the subject matter of the contract is the provision of goods, services or digital content; and
• implied remedies available to a consumer for breach of contract by a business.

Other important consumer laws include:

• the Consumer Protection from Unfair Trading Regulations 2008, which prohibit various unfair commercial practices by traders, such as providing misleading information or omitting material information, and include a blacklist of commercial practices that are automatically prohibited (eg, ‘bait advertising’); and
• the E-Commerce Regulations 2002, which require website operators to provide additional specific information about themselves and their services.

13.2 Are franchisees covered under any of these consumer protection measures?

No.

14 Data security and cybersecurity

14.1 What is the applicable data protection regime in your jurisdiction and what specific implications does this have in the franchising context?

In May 2018, the Data Protection Directive was replaced by the General Data Protection Regulation (2016/679) (GDPR). While the GDPR did not have to be implemented into domestic law in EU member states, it affords a significant degree of leeway for member states to supplement, and derogate from, various provisions. The United Kingdom has implemented this by passing the Data Protection Act 2018 (DPA 2018).

A pan-EU replacement for the e-Privacy Directive has been expected for some time; however, at the time of writing, its progress through the legislative process has been slow. It therefore remains to be seen how the UK Privacy and Electronic Communications (EC Directive) Regulations 2003 (which currently implement the e-Privacy Directive) will be updated once the European Union’s replacement for the e-Privacy Directive has been finalised.

The GDPR and the DPA 2018 impose obligations upon franchisors and franchisees with respect to any personal data that is processed by them or on their behalf. They also grant data subjects rights in respect of their personal data.

‘Personal data’ is information that relates to an identified or identifiable living person, such as a customer, a member of staff or a supplier. The laws impose obligations on ‘data controllers’ (ie, those who alone or jointly determine the purposes and means of processing personal data) and ‘data processors’ (ie, those who process personal data on behalf of data controllers, such as their suppliers). In many situations, franchisors and their franchisees will each process personal data as a data controller, but the specifics of data processing arrangements will need to be reviewed to determine the precise role of each.

14.2 What cybersecurity obligations are applicable in your jurisdiction and what specific implications does this have in the franchising context?

The GDPR has introduced significant new obligations and much higher fines than were previously imposed under the Data Protection Directive – the maximum fine that can be imposed under the GDPR is a figure equivalent to the greater of 4% of the non-compliant data controller or processor’s worldwide turnover or €20 million.

Franchisors and franchisees must notify the UK Information Commissioner’s Office of their data processing activities and pay an annual registration fee, which is calculated with respect to their annual turnover.

Other obligations include the requirement to abide by the data protection principles. For instance, this will mean ensuring that notice is given to relevant individuals about what data will be collected, with whom the data will be shared and how the data will be used. Also, data controllers must ensure that they can point to a lawful basis for their personal data processing activities, such as:

• for the purposes of fulfilling a contract;
• in the legitimate interest of the controllers or a third party; or
• because the data subject’s consent has been obtained.

The data should not be used in any other way that is incompatible with the specified purposes; and appropriate steps should be taken to ensure that data:

• is accurate;
• is kept secure;
• is kept only for as long as necessary; and
• does not go beyond what is necessary to meet the purpose.

Individuals will obtain significant new rights under the GDPR and the DPA 2018, including:

• the right to demand, in certain circumstances, that their personal data be transferred to a replacement service provider (the ‘right to data portability’);
• rights in respect of automated decisions; and
• the right to demand erasure (the ‘right to be forgotten’).

The GDPR and the DPA 2018 have also introduced a requirement for data breaches to be proactively notified to regulators and to individuals affected by the breach. The terms of this notification are onerous, with controllers obliged to notify the regulator without undue delay and, in any event, within 72 hours of becoming aware of a breach.

New accountability or data governance measures will also have to be implemented by data controllers and data processors, including:

• running data protection impact assessments, audits and policy reviews;
• retaining activity records; and
• (in certain prescribed circumstances) appointing a data protection officer.

Where a data processor is engaged to process personal data, a long list of provisions set out in the GDPR must be agreed in writing in favour of relevant data controllers. Where two or more data controllers act jointly to agree processing activities, they must enter into a written agreement confirming their respective responsibilities for meeting the obligations imposed by the GDPR and the DPA 2018.

Another significant requirement of the GDPR and the DPA 2018 relates to international transfers of personal data. If such data is being made available from the United Kingdom to a third party located outside the European Economic Area, then the UK organisation (ie, most typically a UK master franchisee or developer) will have to consider the data transfer restrictions, which allow transfers only to a country that ensures adequate data protection for the rights of data subjects (measured against the protections offered under EU data protection laws). Transfer adequacy mechanisms such as standard contractual clauses or certification schemes (eg, the US-EU Privacy Shield) approved by the European Commission are options.

Taking all the above points together, franchisors and franchisees would be well advised to review their contractual and operational procedures to ensure that they have appropriately amended these to comply with the changes that Europe’s new data protection laws have brought.

15 Disputes

15.1 In which forums are franchising disputes typically heard in your jurisdiction? What issues do such disputes typically involve?

In domestic franchise disputes, depending on the nature of the franchisee’s conduct or breach, a franchisor may seek an injunction to either stop or compel certain conduct by the franchisee. For most breach of contract claims, litigation as opposed to arbitration is the typical form of dispute resolution in the United Kingdom.

The English courts will recognise and uphold foreign choice of law and jurisdiction clauses. It is, however, advisable to ensure that a franchise agreement is reviewed by an English law expert in franchising to ensure that there are no clauses that would be unenforceable or contrary to public policy.

It may take between 12 and 18 months before a dispute reaches full trial. By this point, the restrictive covenants (and the injunction) will most likely have expired and the dispute will primarily focus on the level of harm suffered by the franchisor and the level of damages to which the franchisor (if successful) is entitled.

Brexit means a certain degree of uncertainty when it comes to the enforcement of agreements within the European Union. As regards where disputes will be heard (ie, jurisdiction), during the time that the United Kingdom was an EU member state, the UK courts recognised and enforced court judgments from other EU member states by virtue of the Recast Brussels Regulation and Lugano Convention. The problem post-Brexit is that both these conventions require reciprocity to be effective; therefore, they could not simply be incorporated into UK law when the country left the European Union, because the United Kingdom will not be recognised by the other signatories to the conventions. The United Kingdom has acceded to the Hague Convention on Choice of Court Agreements, which means that where a contract confers exclusive jurisdiction on the English courts, that choice shall be honoured; however, this will not extend to non-exclusive or asymmetric clauses and parties are therefore advised to make any choice of jurisdiction exclusive. Domestic disputes and international disputes without an EU element should not be affected.

Furthermore, it is important for international franchisors to note that the United Kingdom is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards, and the English courts will readily recognise and enforce foreign arbitral awards from other convention countries. This will remain the same post-Brexit, and we may see a marked increase in the adoption of arbitration clauses as a means of resolving disputes.

Governing law clauses will be unaffected by Brexit, as the EU Rome Convention on governing law will continue to be binding on EU member states in relation to the United Kingdom, as it does not require reciprocity. The Rome Convention has now disappeared from the UK statute book, but has been reincorporated into UK law under the terms of the European Union (Withdrawal) Act 2018.

15.2 Is mediation commonly used in franchising in your jurisdiction? Is arbitration commonly used in franchising in your jurisdiction?

While mediation is a recognised form of alternative dispute resolution and is actively encouraged by the Civil Procedures Rules, it is not mandatory.

However, the parties can incorporate a mandatory mediation process in the dispute resolution clause in the franchise agreement, which is likely to be upheld by the courts in the United Kingdom. There is no specific procedure for franchise disputes in the United Kingdom – most are settled before reaching formal alternative dispute resolution methods or court-based litigation.

The British Franchise Association (BFA) offers both a mediation scheme and an arbitration scheme, although the latter has not experienced a significant take-up rate. Certainly, for international franchisors and more sophisticated disputes, it is probably advisable to use one of the more experienced international arbitral bodies, such as the London Court of International Arbitration. Before the parties engage in mediation or arbitration, the BFA also offers an informal conciliation scheme, aimed at facilitating an amicable discussion between the parties and allowing each of the parties to make representations about their case.

15.3 Can class actions be brought in your jurisdiction? If so, what specific implications does this have in the franchising context?

Class actions can be brought, but the process is rather cumbersome.

15.4 Have there been any recent cases of note?

Those on the concept of good faith (see question 7.6).

16 Trends and predictions

16.1 How would you describe the current franchising landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Franchising is thriving, despite the COVID-19 pandemic and the resulting adverse impact upon the economy generally. The impact of Brexit on the availability of employees in the food and beverage sector is having a noticeable effect on franchises in that sector, but nothing too damaging.

Healthcare, education and hotels and leisure are booming sectors.

17 Tips and traps

17.1 What are your top tips for franchisors seeking to enter your jurisdiction and what potential sticking points would you highlight?

Although there is no legal requirement for a pre-contractual disclosure document, it is recommended that one be used as a way of fending off potential claims of misrepresentation from unhappy franchisees.

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