News & Insights

Stress is high in many sectors of the business community owing to COVID-19 lockdowns and restrictions. Franchises are no different with an additional layer of complexity, thanks to the franchisor/franchisee dynamic. So, how can you determine what your current relationship with franchisees is like and, importantly, how can you ensure it’s on a good footing moving forward?

the franchising code of conduct

Legally, the relationship between franchisors and franchisees is regulated by the Franchising Code of Conduct so you need to check that both you and your franchisees are meeting your obligations. This should be a standard business practice for you but given recent events, it’s good to make sure that you’re on top of this and reviewing the lay of the land regularly so that you can address issues as they arise.

acting in “good faith”

A central tenant of the Code is “good faith” – an obligation for both the franchisor and franchisee to act in good faith towards each other throughout the course of their business relationship. This is important at the best of times but arguably more so during a crisis such as the COVID-19 pandemic.

Given that many businesses are experiencing upheaval by way of difficulties with leasing, wages and closure to name a few problems, this is unknown territory however, acting in good faith will assist in maintaining good relations with your franchisees.

Make sure that you are acting in good faith by checking that you are:

• Exercising powers reasonably
• Being transparent in your dealings and communicating any changes
• Making decisions in a timely manner
• Respecting and acting in accordance with the rights and interests of your franchisees.

remember communication is two-way

Above all else, talk with your franchisees and make sure that you listen to their concerns and issues. It is likely that you are both experiencing many of the same pressures at the moment so cooperation is key to maintaining good relations – and a viable business.

It has been refreshing to see that many franchisors and franchisees are working together through this time. While it is in both of their best interests to ensure that their business continues, it will also ensure that they don’t breach the Franchising Code and good faith obligations.

Our Franchising team is here to help you and your franchisees to navigate this challenging time. If you have any questions or are unsure about how best to act in good faith, please contact us.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.