Getting The Deal Through logo
Getting The Deal Through


In my introduction to Getting the Deal Through – Franchise, I described an experience many of us have had. I recounted a general counsel’s arrival at the office to find a message from his boss, posing a series of questions about franchising in a number of countries around the world – questions to which the general counsel, understandably, has no ready answers. The same experience, of course, is familiar to outside counsel encountering a client’s expectations.

A survey of the available sources of information comes up empty. None is sufficiently comprehensive yet digestible. Getting the Deal Through – Franchise seeks to meet that need by posing and answering the key questions one must address about franchising in a country. Now in its 13th edition, it covers 26 countries, and has proven its value many times over. It is a classic ‘desk book’ that belongs next to your telephone (if you still have one) or your computer.

But what then? After your rapid and impressive response, what happens when you need to delve more deeply into the issues raised by your company’s or client’s plan to expand by franchising? For that purpose, a book that provides succinct answers to threshold questions, however authoritative, is, as social scientists say, ‘indispensable but insufficient’.

By now you know that franchising touches, glancingly or with full force, on almost every legal discipline. And you also know that none of those disciplines addresses franchising as squarely as you would like; that there are shockingly few law schools that include franchising in their curriculum; and that there are no course books that adequately cover the territory you will need to traverse.

Enter Getting the Deal Through’s Practice Guide – Franchise.

If Getting the Deal Through – Franchise was designed to be left on your desk, Practice Guide – Franchise can perhaps best be thought of as the book you will take on your next flight.

So settle in.

Adjust your seat, your footrest and your reading light.

You will almost certainly want to begin by examining the fundamental legal doctrines, statutes and regulations that govern how franchising is treated in law. That obviously requires an understanding of how different countries have chosen to regulate franchising explicitly (or declined to do so). So you begin with Global Overview of Specific Franchise Statutes and Regulations, which includes a handy chart at the end, keyed to the various approaches. But you will also want to step back and examine two broader and older legal constructs that are essential. One of those inquiries will be to learn how franchising is treated in the foundational legal structures of different countries, in Common Law and Civil Law on Franchising Issues. Under what circumstances will the analyses under those two systems lead to different results? And, you will need to have a grasp of another overarching theme, depending on how a country has chosen to apply it, or not, as the case may be (see Good Faith and International Franchising).

Now that you have an overview of the legal structures you will need to understand, it’s time to get a sense of how franchisors go about selecting the form of expansion that best suits the company’s business model, culture and management practices (Selecting the Appropriate Vehicle for International Expansion). One of those techniques – sub-franchising – is given special attention, not necessarily because it is the ‘right’ choice, but rather because it is the most complex of the hierarchy of approaches to expansion, and because it is much more commonly utilised in cross-border than in domestic franchising (Sub-franchising Master Franchising and Development Agents).

It is also important to keep in mind that franchising is constantly evolving to take advantage of new techniques and approaches. Prominent among the new techniques are e-commerce and social media (see Electronic Commerce, Social Media and Franchising). There, as you will see, problems that arise are frequently owing to e-commerce not having been addressed adequately in the original franchise agreement and relationship.

The decision of how best to go about the business of expansion is, along with selecting the countries you wish to target, certainly at the threshold of your business and legal initiative. And understanding these critical ‘first issues’ will surely consume a sizable share of the time on your flight.

Now it’s time to turn to the heart of the franchise relationship, and examine how the franchisor and the franchisee choose to express the bargain they have reached. Much of this process is understanding how elements of that bargain can best be articulated to leave as little as possible to be the subject of differing interpretations. But the parties are not entirely free to do whatever they wish, nor is one party free to demand that its wishes be adopted in all respects, because franchise laws and other bodies of law impose limits and restrictions on the parties. Some of the key provisions of the Franchise Agreement are discussed. Confidential and Proprietary Information and Trade Secrets points out the pivotal role this plays in the essential intellectual property associated with the franchise, and the challenge to protect it in each country where the franchisor anticipates selling franchises. Special attention is given to Approaches to Resolving Cross-Border Disputes Between Franchisee and Franchisor, including a separate chapter on the Choice of Law and Choice of Dispute Resolution Mechanism in Cross-Border Franchise Agreements.

Other bodies of law, of course, impinge upon franchising, and an understanding of how they interface is important to a competent franchise lawyer (see M&A in International Franchising). Consumer Protection begins by addressing the concept of a consumer, which may differ by jurisdiction, and discusses the consequence of applying consumer protection laws to franchising. Data Protection and Privacy highlights the challenge presented to multinational franchisors in complying with the laws in this area adopted in nearly 120 countries, and suggests some approaches to meeting that challenge. Joint Employer and General Labour and Employment Issues examines the threat posed by this rapidly evolving field of law.

Among the subjects addressed by countries that have chosen to regulate franchising, the most common obligation is probably the duty to provide a prospective franchisee with information on the basis of which an informed investment decision can be made. The most robust embodiment of that obligation is the franchise disclosure document, discussed here in some detail in the chapter on Franchise Disclosure Documents.

Ladies and gentlemen, we are beginning our descent.

You have not, of course, been exposed to every nook and cranny of franchise law. That would require, at a minimum, several trips around the world.

But you can disembark now. You’re off to a good start.

Footnotes

[1]    Philip F Zeidman is a partner at DLA Piper.


Back to Franchise




Follow Getting the Deal Through for the latest updates on law and regulation worldwide

Follow us on LinkedIn