Self-regulation is a vital aspect of regulating franchising. From a societal standpoint, there is no need to interfere with legislation if a less onerous measure works in all parties’ favor. The International Franchise Association is the largest Association in the USA. We will be looking at the European Franchise Federation (EFF) and its purpose in today’s blog.
The EFF was created in 1972 in France as a non-profit institution tasked with creating awareness for franchising in Europe. There were only four founding associations, and currently, there are 15 associations part of the EFF. The EFF’s vision was to develop Europe’s franchise industry by creating a franchising Code of Ethics.
In this system, member associations play a crucial role. The EFF uses a decentralized, bottom-up approach to increase the reputation of franchising in Europe.
The EFF is a strong proponent of self-regulation in the franchise industry; they believe this can be best achieved by having a Code of Ethics. As a result, the EFF and some of its member associations are vehemently against proposals to regulate franchising. Member associations of the EFF focus on protecting their members rather than promoting franchising, which is at odds with the self-regulatory environment’s goal.
The European Code of Ethics for Franchising has six sections and is eight pages long; in other words, it is relatively short and concise. The code was created in 1972 and has been amended in 1992 and 2016. The code applies to all franchise relationship stages, starting from the pre-contractual, contractual, and post-contractual stages. This code is a “foundation stone” for the EEF’s member associations.
The first section of the code consists of definitions, and the second section contains the commitments that both the franchisee owes to the franchisor and vice versa. The franchisor shall assist throughout the entirety of the agreement.
The reason being that the franchisor can’t merely sell the franchisee a franchise, provide initial training, and then disappear. It is an ongoing relationship that requires both parties to help each other. Likewise, the franchisee has an obligation to attempt to make the franchise grow.
Section three of the code includes recruitment, advertising, and disclosure requirements. An essential requirement is not to offer potential franchisees any ambiguous or misleading information. In other words, franchisors must operate in a bona fide manner and must not take advantage of the weaker party. There is a detailed list of what minimum terms should be included in the franchise agreement in section five of the code.
Section four gives the franchisor the right to choose who can be a franchisee, and section six makes the code applicable to the master franchisee systems.
It is evident throughout the code that franchising is a joint effort, and the best results can be achieved through cooperation within the franchise network, namely between the franchisor and franchisee. Nonetheless, this code is only a guideline on how to operate and does lack locus stand.
