FranChat: October 2020

We're delighted to share the second edition of our international franchising update. The newsletter focuses on legal developments impacting on franchise businesses across the globe.

As well as market and industry updates from our Franchising team, the newsletter also features contributions from firms across our wider network. In this edition, we are pleased to include contributions from Tay & Partners on recent amendments to the Franchising Act in Malaysia, as well as from Bird & Bird's consultancy arm, OXYGY, on why franchisors should invest in a due diligence exercise. 

This newsletter will also keep you informed of any upcoming webinars hosted by our Franchising team and other groups across Bird & Bird that we think may be of interest.

Keeping in touch

Please do get in touch with the authors or your usual contact if you would like to discuss any of the issues raised in these articles, or visit our webpage for more information about Bird & Bird's Franchising team. 

Use the links below to navigate through our newsletter:

Global

Malaysia

The Netherlands

UK

News & Events

Global

How do the regulators and courts view Business Interruption insurance policies?

Businesses around the world have been affected by extensive disruption and/or closure as a result of the Coronavirus pandemic. This had led to enormous financial loss in addition to other economic and personal hardships. Many businesses have made claims to seek to recover these financial losses under their Business Interruption (BI) insurance policies.

Our Business Interruption insurance tracker allows you to see at a glance how regulators and courts across key jurisdictions view insurance policies and the coverage claims that have already been made. The tracker currently covers Australia, France, Germany, Hong Kong, Spain, The Netherlands and the UK.

In the UK, the High Court judgment on the FCA's expedited business interruption insurance test case, The Financial Conduct Authority v Arch and Others [2020] EWHC 2448 (Comm), was handed down on 15 September 2020. Click here to read the judgment and here to read our commentary.

Why should international franchisors invest in a due diligence exercise?

With thanks to Vera Pellegrin, Senior Manager at OXYGY for contributing this article.

According to a widely used definition, the objective of a due diligence exercise is to ‘perform a sensible review’. With this definition in mind, there are several types of due diligence that respond to different needs.

OXYGY’s international network can support franchise companies with commercial, financial, leadership and reputational due diligence on prospective franchisees and developers wherever in the world they are located.

This article will focus on the kind of due diligence that can benefit brands and educational institutions moving into an international franchising space or widening their network.

Malaysia

Amendments to the Franchise Act 1998

With thanks to Lee Lin Li, Partner, and Chong Kah Yee, Associate at Tay & Partners for contributing this article.

Malaysia has introduced various amendments to the Franchise Act 1998 (“FA”) via the Franchise (Amendment) Act 2020 (“Amending Act”) to ensure conformity with the current developments of the franchise business in Malaysia.

The Amending Act was published in the Gazette on 6 March 2020 after receiving its Royal Assent on 20 February 2020. It has yet to come into force but is anticipated to do so at the end of this year or early next year.

The Netherlands

The Dutch Franchise Act: getting ready for 1 January 2021

In all likelihood, the new Dutch Franchise Act will apply as of 1 January 2021. National and international franchising businesses have been busy getting ready for the implementation of the relevant requirements into their franchise agreements and into their business operations. If you haven’t already done so, now is the time to get started.

In this article we set out a framework of actions and we also highlight the core elements of the act. Before doing so we set out the (potential) international applicability of the act. Franchise agreements, both purely domestic as well as international, should be reviewed and, where required, amended for compliance with this new legislation. Furthermore, the Franchise Act may mean that other (legal or operational) documentation will have to be created or amended, e.g. precontractual information documentation.

UK

Brexit: the impact on trade between the UK and the EU for franchise businesses

If your franchise relies on products being imported into the UK or involves the supply of products to franchisees in the EU then, if at the end of the transition period no free trade agreement is negotiated, you could face the possibility of tariffs being introduced and increased regulatory and administrative burdens imposed related to the import and export of products.

Brexit: what will happen to cross-border disputes on 1 January 2021?

The prospect of the UK failing to agree a deal on its future relationship with the EU increasingly appears to be on the horizon. If agreement is not reached, and there is no Future Relationship Agreement, then EU law will cease to apply from the end of the transition period – 31 December 2020. This note looks at the changes that will occur to UK law at the end of the transition period in this area, and what you can do to prepare for them.

Maximising the benefit of trading losses

Franchise businesses grappling with the broad range of issues brought about by the pandemic are conserving cash wherever possible. In the UK, these businesses may have taken advantage of the Job Retention Scheme to continue paying staff or applied for one of the COVID-19 support loans or grants offered by the government. They may also have taken advantage of VAT deferral arrangements. When those cashflow benefits are combined with the benefit of offsetting any current year trading losses to offset last year’s taxable profits, tax can start to take on a different role in a business: it becomes cash generative rather than a cost to the business.

News & Events

We advise Mothercare on the appointment of Boots as its UK and Republic of Ireland franchise partner

The partnership will enable Mothercare to have its branded clothing, home and travel products sold in Boots stores from autumn 2020 as well as online on the Boots website.

The Bird & Bird team advised Mothercare on the franchise, intellectual property and supply chain elements of the long term deal. The franchise partnership will be for an initial period of 10 years. Last year, Bird & Bird took a lead role in advising Mothercare plc, and its wholly owned subsidiary Mothercare Global Brand, on a major restructuring and refinancing. In addition to the partnership with Boots, Bird & Bird also advised Mothercare on its new twenty-year franchise and supply chain agreements with its longstanding franchise partner Alshaya Group.

Melissa Murray participates in the International Bar Association webinar "News from around the world: recent developments in franchise law"

The webinar, presented by the International Bar Association (IBA) Franchising Committee, discussed recent legal developments and trends affecting franchising in different countries.

Bird & Bird Partner, Melissa Murray, presented to a live audience of almost 100 delegates on how COVID-19 has impacted on the retail and consumer market in the UAE, and how this may impact existing and future franchise relationships. She also spoke on the newly implemented Saudi Arabia Franchise Law.

The recording of the webinar is available to watch from the IBA website here.

Our Retail & Consumer team hosts webinar series on post-COVID restart strategies

Our international Retail & Consumer team recently hosted a series of webinars to explore how businesses in this sector can not only recover from the impact of COVID-19, but also look for new opportunities during this challenging time.

The team shared five webinars over one week in September, with each focusing on an important topic for retail and consumer-facing businesses in the wake of COVID-19:

• The impact on the workforce (Pattie Walsh, Stephanie Wong)
• An opportunity for innovation and transformation (Edoardo Monopoli (OXYGY), Ian Edwards, Rebecca O'Kelly-Gillard)
• The impact on food & beverage regulations and sustainability (Nicolas Carbonnelle)
• The impact on supply chains (Graeme Payne, Victoria Hobbs, Jordan Cooper, Nick Green, Megan Harrison, James Fowler)
• Three relevant contract law developments in 2020 (Andrew White)

If you missed it, it's not too late to listen! Register your details here to receive a link to the recorded sessions.