What is the Franchising Code of Conduct?

date icon 4 minutes to read date icon 4th October, 2022

Franchising across the UK has undergone tremendous changes since the concept of franchising first came about in the middle of the 20th century. One of the most fundamental changes has been the establishment of the British Franchise Association (bfa) as far back as 1977 and the development of its Franchising Code of Conduct. The reason why this Code is so important is that to this day, the franchising industry in the UK (and in many parts of Europe) remains legislatively unregulated.

This has the potential to cause conflicts and misunderstandings between franchisors and franchisees and the bfa’s Code of Conduct helps to address this gap. In particular, in its early days, it sought to focus on the poor representation of franchising in mainstream media, whereas today, it is a body that oversees the franchising sector and offers guidelines as well as help with mediation and arbitration, where necessary.

The Franchise Code of Conduct in the UK

If you haven’t heard of it and you are wondering what the Franchising Code of Conduct is, it’s worth knowing that this is a code of ethical conduct that is created to govern relationships between franchisors and franchisees. The bfa either accredits or approves its members, who are then required to adhere to the Code. This code governs aspects of franchising such as contracts between franchisors and franchisees, the business structure and model of the franchise and more.

The most recent edition of the bfa’s Guide to the Code of Ethics provides a comprehensive explanation of the bfa’s criteria for ethical behaviour and best practices related to key areas in franchising and in particular, the relationship as outlined in the franchise agreement. Important to note, however, is that neither the bfa’s Guide nor its Code of Ethics are intended to form a part of any contract between franchisor and franchisee with the exception that both parties have specifically reached an agreement regarding this.

What is more is that franchisors, who are members of the bfa, shouldn’t be expected to guarantee business success. On the other hand, a part of their responsibility is in showing that they have proven the business concept as far as possible. The primary reason for this is that the franchising industry, much like any other, is not exempt from economic fluctuations and risks.

Importance of the Franchising Code of Conduct

It’s highly important for creating franchise agreements which are fair. As both franchisor and franchisee are expected to sign and abide by the terms of the agreement, it’s essential that both parties are guided by ethical practices. These can relate to protecting the industrial and intellectual property rights of the franchisor, agreeing to the terms of contract renewal or termination and many others.

A further area where the bfa plays an extremely important role is that by being a bfa member and necessarily adhering to the Code, members are viewed as much more credible and trusted franchise partners.

Some of the guiding principles for franchisors and franchisees include following rules in terms of disciplinary action, complaints and appeals as well as following the Code of Advertising Practice as set out by the Advertising Standards Authority. Failure to uphold those standards means that bfa endorsement will be terminated.

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Parties’ obligations under the Franchising Code of Conduct

There are certain obligations under the Franchising Code of Conduct for both franchisors and franchisees. Let’s take a closer look.

Franchisor obligations under the Code

Franchisor obligations include but are not limited to the following:

  • They should legally own their business or at the very least have legal rights to operate under its trade name;
  • The business should operate under the premise of a proven business model;
  • Offer training and ongoing support to franchisees;
  • Supply the franchisee partners with the latest copy of the BFA’s code, in addition to current and exact information prior to the signing of the franchise agreement; and
  • Notify franchisee partners of any breaches in contract through the written form. Franchisees must be given the opportunity to address such breaches prior to further action being taken.

Franchisee obligations under the Code

Following the signing of a franchise agreement, franchisees are also obliged to:

  • Adhere to the brand lines, uphold the parent brand’s reputation and follow all guidelines related to ensuring that the business model is followed as closely as possible for success;
  • Communicate with the franchisor on a regular basis, regarding performance, records and more within reasonable periods of time; and
  • Fully comply with every stipulation in the non-disclosure agreements which they signed.

Concluding remarks

Becoming a member of the bfa is a wonderful way of gaining credibility as a franchisor as it necessarily implies adherence to the organisation’s Code of Ethics. This gives you a much higher standing than other franchisors who may not be members and do not abide by the Code. Elevating your franchise as a reputable operator is an important way of gaining the trust of your prospective franchisees. This is one of the best ways to help your business grow and thrive in a competitive marketplace and means you’re a reputable franchisor who can be relied upon to act ethically and transparently in your dealings with all franchise stakeholders.