Franflash: Round up - October 2012
03 October 2012
Welcome to the latest edition of Franflash - Round
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 Field Fisher Waterhouse
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
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
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
Significant amendments to single brand retail policy in
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