Franflash: Round up - October 2012
Welcome to the latest edition of Franflash - Round up
In this Franflash we highlight a number of changes in the laws that impact upon franchising around the world. The regulatory environment in foreign markets will have a potentially substantial impact upon franchisors' approach to these changes.
The regulatory and legal hurdles can, in some markets, totally change the balance of the franchisor/ franchisee relationship. This may, in extreme cases, impact upon how the franchisor perceives the potential of a particular market. It will always impact the contents of the franchise agreement and how it is drafted.
Retail and leisure companies considering international franchising must therefore involve expert franchising lawyers early on in the formulation of their international strategy. This will optimise their chances of success by identifying the most appropriate structures. It will also help ensure that they comply with the legal and regulatory requirements in their target markets. Recently we have found that much of our work has involved trying to sort out funadamental and substantial problems that have arisen because franchisors failed to take expert advice and as a result failed to comply with mandatory local law at all, or in the most appropriate way.
Whichever structure is adopted, international franchising is not without its challenges. It requires a clear strategy as to how the regulatory and legal hurdles encountered will be cleared.
Please feel free to contact any of the Fieldfisher Franchise team for more details.
Expanding into new markets through franchising
There has been a growing interest from established brands in the retail and F&B and Quick Service Restaurants (QSR) sectors in the use of franchising as a way to access new markets during the last year.
Can you enforce all your guarantees?
When entering into a franchise agreement with a corporate franchisee, it is common practice for the franchisor to require a director or shareholder to provide a personal guarantee. Thereby acting as security to ensure the franchisee company meets its obligations, in particular its obligations to pay fees. A recent case highlights the care required to ensure that such guarantees are enforceable.
New franchise regulation for Indonesia
International franchisors are increasing looking at Indonesia as an attractive market in which to establish their brand. The MOIT are finalising new draft legislation which is likely to impact the structure of franchise deals.
Late payments and termination in Italy
A recent Italian judgment in the Tribunal of Palermo has offered an insight into how the Italian courts will assess whether a franchisor can validly terminate a franchise agreement for delayed payments by the franchisee.
FDI in multi-brand retail sector in India
On September 14, 2012 the Cabinet decided to permit Foreign Direct Investment (“FDI”) in multi-brand retail but the exact terms and conditions attached to this policy has not yet been released officially.
Significant amendments to single brand retail policy in India
On 10th January 2012 the Government of India allowed foreign retailers to hold up to 100% shares in a company involved in single brand retail, up from a limit of 51% but subject to a number of conditions. Some of the conditions attached to the policy were difficult in practical terms to implement for most foreign brands.