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This article provides an overview of the legal landscape and related best practices to consider when expanding a franchised business into the United Kingdom (UK).1 The UK government has a flexible open-door policy for those setting up businesses or expanding into the country. Any foreign-owned or -directed enterprise receives exactly the same treatment as a UK-owned or -directed enterprise and is subject to the same regulations. Also, there are no separate regulations for the franchising sector, and the UK's general contract, tort, commercial, and company laws apply.
British Franchising Association
Franchising in the UK is subject to self-regulation by the British Franchise Association (BFA) in accordance with its code of ethics (BFA Code), which is largely based on the European Code of Ethics for franchising promulgated by the European Franchise Federation. The BFA, the voluntary governing body for franchising in the UK, was established by a small group of franchisors in 1977 to represent the interests of the franchise industry and to improve the standards of franchising.
Unlike the International Franchise Association, the BFA is a standards-based organization that requires its members to comply with its standards as set out in the BFA Code and technical bulletins. Certain key standards and technical bulletins are discussed further below.
Judiciary's View
BFA requirements and the BFA Code apply to BFA members only but, in Drivertime Recruitment Ltd. re DST Ltd.,1 a case involving the winding up of a franchisor that was not a BFA member, the UK High Court recognized the BFA Code's importance in assessing the behavior of franchisors generally. There is therefore a significant risk that nonmember franchisors that fail to operate their franchise businesses in accordance with the BFA Code will be subject to criticism from the UK courts.
In Drivertime Recruitment Ltd. , Drivertime, the franchisor, sold franchises in the temporary driver recruitment industry. Between 2000 and December 2003, Drivertime sold fortyseven franchises (receiving the equivalent of over $1 million), of which only one unit was still operating at the end of 2003. The court concluded that Drivertime failed to disclose its very high failure rate to potential franchisees and deliberately evaded BFA requirements mandating disclosure of prior disputes, any involvement in litigation, and details about those involved in the franchise business,...