Your expansive guide to franchising’s legal frameworks, and what a business should look for when it comes to comprehensive counsel
Interview by Kieran McLoone, deputy editor for Global Franchise.
The legalities of franchising might not be the most outwardly thrilling subject associated with this dynamic and global business model, but it’s a specialism that is intrinsic to international success.
Protecting your brand from a whole litany of legal troubles can only be done with an experienced, knowledgeable team. Foregoing proper system and processes will open a brand up to issues which could damage not only the brand’s reputation, but could also jeopardize an entire franchise network.
To cover everything you need to know and highlight some key trends within the industry, we’ve spoken to several experts from a plethora of legal firms and have prepared a crash course for brands with global ambitions.
This week Shelly Nadler, Bird & Bird LLP and James Talbot and Michelle Davies, HGF discuss Europe, GDPR, and Brexit.
KM: What laws and legislation are affecting international franchisors in Europe?
SN: The EU’s recent introduction of the General Data Protection Regulation (GDPR) has had a big impact on any business, wherever it is located if it deals with personal data belonging to a natural person that resides in the EU and EEA countries. GDPR means that citizens of the EU and EEA now have greater control over their personal data and assurances that their information is being securely protected across Europe. GDPR requires international entities dealing with EU/EEA personal data to implement specific technological and procedural safeguards with respect to that data.
Perhaps the most important thing to consider is the fact that whilst there are EU laws that apply across the EU/EEA, such as competition law, many laws that impact on a franchise business, for example, franchise laws (including pre-contractual disclosure), consumer laws, and employment laws are different in each European country.
KM: What fundamentals of franchising in Europe do international franchisors tend to overlook?
SN: The laws around how franchise brands use the internet and social media in Europe always present a challenge to franchisors from North America.
Under EU and U.K. anti-trust laws, a franchisor cannot prevent a franchisee from using the internet or having its own website in connection with its franchise business. This can conflict with the franchisor’s desire to centrally control the web presence of a brand in a particular country or region.
A blanket ban on a franchisee using the internet as seen in some U.S. franchise agreements will not work in Europe and franchisors will need specialist advice from their European lawyers on how to maintain their brand identity and standards whilst complying with the law.
KM: Do you foresee Brexit having a notable impact on franchises operating in Europe?
JT & MD: Neither the U.K. nor the EU has legislation specific to franchising but this is currently on the agenda of the EU Commission. If EU-wide regulations are implemented for franchising, it is likely the U.K. would implement equivalent procedures or would need to take these into account if the franchise reached Europe.
For franchise agreements put in place now, it is useful to include a ‘Brexit’ provision which would allow the parties to review and amend certain terms if required for any reason following the end of the post-Brexit transition period. The legal effects of Brexit on franchising may actually be more indirect as, for example, many franchise arrangements rely heavily on EU labor.
