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We subscribe to
The European Code of Ethics
for Franchising
Synopsis
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Definition of franchising
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Guiding principles
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Recruitment, advertising and disclosure
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Selection of individual franchisees
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The franchise agreement
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The code of ethics and the master-franchise system
This European Code of Ethics is the
up-to-date version of the Code first elaborated in 1972 by the European
Franchise Federation (EFF). Each National Association or
Federation member of the EFF has participated in its writing and will ensure its
promotions, interpretation and adaptation in its own country. This Code of Ethics is meant to be a
practical ensemble of essential provisions of fair behaviour for Franchise
practitioners in Europe.
1.
Definition of franchising
Franchising is a system of
marketing goods and/or services and/or technology, which is based upon a close
and ongoing collaboration between legally and financially separate and
independent undertakings, the Franchisor and its individual Franchisees,
whereby the Franchisor grants its individual Franchisee the right, and imposes
the obligation, to conduct a business in accordance with the Franchisor's
concept.
The right entitles and compels the
individual Franchisee, in exchange for a direct or indirect financial
consideration, to use the Franchisor's trade name, and/ or trademark and/or
service mark, know-how (*), business and technical methods, procedural system,
and other industrial and /or intellectual property rights, supported by
continuing provision of commercial and technical assistance, within the
framework and for the term of a written franchise agreement, concluded between
parties for this purpose.
2.
Guiding principles
2.1 The Franchisor is the initiator
of a franchise franchise, composed of itself and its Individual Franchisees, of
which the Franchisor is the long-term guardian.
2.2 The obligations of the
Franchisor: The Franchisor shall
- have operated a business concept
with success, for a reasonable time and in at least one pilot unit before
starting its franchise franchise
- be the owner, or have legal
rights to the use, of its franchise's trade name, trade mark or other
distinguishing identification
- provide the Individual Franchisee
with initial training and continuing commercial and /or technical assistance
during the entire life of the agreement.
2.3
The
obligations of the Individual Franchisee: The Individual Franchisee shall
- devote its best endeavours to the
growth of the franchise business and to the maintenance of the common identity
and reputation of the franchise franchise
- supply the Franchisor with
verifiable operating data to facilitate the determination of performance and
the financial statements necessary for effective management guidance, and
allow the Franchisor, and/or its agents, to have access to the individual
Franchisee's premises and records at the Franchisor's request and at
reasonable times
- not disclose to third parties the
know-how provided by the franchisor, neither during nor after termination of
the agreement.
2.4 The ongoing obligations of both
parties:
Parties shall exercise fairness in
their dealings with each other. The Franchisor shall give written notice to
its Individual Franchisees of any contractual breach and, where appropriate,
grant reasonable time to remedy default;
Parties should resolve complaints,
grievances and disputes with good faith and goodwill through fair and
reasonable direct communication and negotiation.
3.
Recruitment,
advertising and disclosure
3.1 Advertising for the recruitment
of Individual Franchisees shall be free of ambiguity and misleading statements;
3.2 Any recruitment, advertising and
publicity material, containing direct or indirect references to future possible
results, figures or earnings to be expected by Individual Franchisees, shall be
objective and shall not be misleading.
3.3 In order to allow prospective
Individual Franchisees to enter into any binding document with full knowledge,
they shall be given a copy of the present Code of Ethics as well as full and
accurate written disclosure of all information material to the franchise
relationship, within a reasonable time prior to the execution of these binding
documents
3.4 If a Franchisor imposes a
Pre-contract on a candidate Individual Franchisee, the following principles
should be respected:
- prior to the signing of any
pre-contract, the candidate Individual Franchisee should be given written
information on its purpose and on any consideration he may be required to pay
to the Franchisor to cover the latter's actual expenses, incurred during and
with respect to the pre-contract phase ; if the Franchise agreement is
executed, the said consideration should be reimbursed by the Franchisor or set
off against a possible entry fee to be paid by the Individual Franchisee;
- the Pre-contract shall define its
term and include a termination clause ;
- the Franchisor can impose
non-competition and/or secrecy clauses to protect its know-how and identity.
4.
Selection of
individual franchisees
A Franchisor should select and
accept as Individual Franchisees only those who, upon reasonable
investigation, appear to possess the basic skills, education, personal
qualities and financial resources sufficient to carry on the franchised
business.
5.
The franchise agreement
5.1 The Franchise agreement shall
comply with the National law, European community law and this Code of Ethics and
any national Extensions thereto.
5.2 The agreement shall reflect the
interests of the members of the franchised franchise in protecting the
Franchisor's industrial and intellectual property rights and in maintaining the
common identity and reputation of the franchised franchise. All agreements and all
contractual arrangements in connection with the franchise relationship shall be
written in or translated by a sworn translator into the official language of the
country the Individual Franchisee is established in, and signed agreements shall
be given immediately to the Individual Franchisee.
5.3 The Franchise agreement shall
set forth without ambiguity, the respective obligations and responsibilities of
the parties and all other material terms of the relationship.
5.4 The essential minimum terms of
the agreement shall be the following:
- the rights granted to the
Franchisor
- the rights granted to the
Individual Franchisee
- the goods and/or services to be
provided to the Individual Franchisee
- the obligations of the Franchisor
- the obligations of the Individual
Franchisee
- the terms of payment by the
Individual Franchisee
- the duration of the agreement
which should be long enough to allow Individual Franchisees to amortise their
initial investments specific to the franchise
- the basis for any renewal of the
agreement the terms upon which the Individual Franchisee may sell or transfer
the franchised business and the Franchisor's possible pre-emption rights in
this respect
- provisions relevant to the use by
the Individual Franchisee of the Franchisor's distinctive signs, trade name,
trademark, service mark, store sign, logo or other distinguishing
identification
- the Franchisor's right to adapt
the franchise system to new or changed methods
- provisions for termination of the
agreement provisions for surrendering promptly upon termination of the
franchise agreement any tangible and intangible property belonging to the
Franchisor or other owner thereof.
6.
The
code of ethics and the master-franchise system
This Code of Ethics shall apply to
the relationship between the Franchisor and its Individual Franchisees and
equally between the Master Franchisee and its Individual Franchisees. It shall
not apply to the relationship between the Franchisor and its
Master-Franchisees.
(*) "Know-how"
means a body of non patented practical information, resulting from experience
and testing by the Franchisor, which is secret, substantial and identified ;
- "secret"
means that the know-how, as a body or
in the precise configuration and assembly of its components, is not generally
known or easily accessible; it is not limited in the narrow sense that each
individual component of the know-how should be totally unknown or unobtainable
outside the Franchisor's business ;
- "substantial"
means that the know-how includes information which is of importance for the
sale of goods or the provision of services to end users, and in particular for
the presentation of goods for sale, the processing of goods in connection with
the provision of services, methods of dealing with customers, and
administration and financial management; the know-how must be useful for the
Franchisee by being capable, at the date of conclusion of the agreement, of
improving the competitive position of the franchisee, in particular by
improving the franchisee's performance or helping it to enter a new market.
- "identified"
means that the know-how must be described in a sufficiently comprehensive
manner so as to make it possible to verify that it fulfils the criteria of
secrecy and substantiality ; the description of the know-how can either be set
out in the franchise agreement or in a separate document or recorded in any
other appreciate from.
Source: eff-franchise.com
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