FranChat: April 2021

We're delighted to share the April 2021 edition of our international franchising update. The newsletter focuses on legal developments impacting on franchise businesses across the globe.

It will also keep you informed of any news and events from 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.

Visit our webpage here.

• Global
• South Africa
• UK
• News & Events

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Global

We have developed a new tool to help you compare franchise-specific laws across the globe

Franchising is becoming an even more popular strategy for businesses looking to enter new international markets – not only in traditional franchise sectors such as food & beverage, hotels and retail, but also in sectors such as education and healthcare. Many businesses are not however aware that franchising is also becoming increasingly regulated and requires experienced specialists to advise not only on the relevant markets' franchise entry requirements, but also what this means practically from a timing, cost and process basis so as not to impede or delay market entry.

To help businesses plan their market entry strategy, we have developed a new information tool which compares franchise-specific laws across the globe. The tool includes a traffic light analysis to help businesses quickly identify the heavily regulated and more complex markets from those which are less burdensome. The comparison tool can be accessed here. If you have any questions please do not hesitate to contact Graeme Payne, Shelley Nadler or your usual contact in Bird & Bird's international Franchising team.

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Franchising in a pandemic

As we enter Q2 of 2021, the global economy is still very much feeling the effects of the COVID-19 virus. We’ve crossed the one-year anniversary of when we started to see lockdowns and closures of businesses all over the world, with people encouraged to stay at home. No one could have predicted the effects of the virus on the global economy and social life. Conversations around when things will get back to “normal” are few and far between – the focus is on adapting to this new “normal”.

We sat down with Mark Cunningham, the Global Development Officer at Smoke’s Poutinerie, to get a franchisor’s perspective on operating a global franchise business in a global pandemic. Founded over 10 years ago, Smoke’s Poutinerie is a Canadian poutine brand (loaded French fries – fresh cut potatoes, piping hot gravy, cheese curd and unlimited variations of toppings). Smoke’s Poutinerie currently has franchised restaurants in Canada and the United States, with ambitious expansion plans for the Middle East and the rest of the world in place.

A few weeks before the UAE government announced a lockdown in Dubai, the company had just signed a deal with a UAE franchisee to open its first restaurant in Dubai in early 2020. You can watch the full video interview here, or read a snapshot summary here.

UK CMA & EU Commission seeking views from franchisors and franchisees on the new VBER

The current Vertical Agreement Block Exemption Regulation (VBER) and its accompanying guidelines provide the framework of competition law regulation for franchises across the EU. It is due to expire in May 2022. The VBER was retained into UK law following Brexit ensuring consistency of the rules in the UK and EU until May 2022. You can see our latest analysis on the future of the VBER here.

Both the UK’s CMA and the EU Commission have launched public consultations to collect stakeholders’ views on what the new regulations should look like, giving franchisors and franchisees a unique opportunity to put forward their suggestions on the topics they would welcome more guidance on. The extent to which franchisors can access the data collected by their franchisees is one such example. Another contentious subject relates to the prohibition of retail price maintenance and whether this should be relaxed for franchises.

The CMA’s roundtable is due to take place in the coming weeks and Bird & Bird will be taking part. It is a chance for franchisors and franchisees to have their voices heard and to put forward convincing arguments straight to the UK regulator.

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South Africa

Legal highlights of franchising in South Africa

With thanks to Eugene Honey (Adams & Adams) for contributing this article.

The Franchise Association of South Africa has been in existence for more than 40 years and has provided a leading and supportive role for the development of ethical franchising and best practices. Franchising is represented across approximately 14 (fourteen) different business sectors or industries, with approximately 800 franchise systems, operating around 48,000 franchised businesses, which contribute around 13% GDP.

Although the South African franchise industry is fairly well established, there are nevertheless many opportunities across many industries, for new franchise businesses to be established in South Africa.

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UK

Use of dark kitchens in franchise systems

There are now approximately 750 dark kitchens operating across the UK with an increasing number of restaurant brands, delivery companies and start-ups investing heavily in the delivery and takeaway sector. Dark kitchens are thriving as the food delivery market is increasingly leveraging all aspects of the platform economy to meet the growing demand for takeaways. The Covid-19 pandemic has also increased demand for home delivery due to the restrictions imposed on dining out.

Many franchisors in the F&B sector are therefore investigating ways to utilise dark kitchens in order to efficiently service the increasing demands of takeaway customers and to capitalise on the benefits that dark kitchens can bring. Although critics suggest that dark kitchens are de-crafting cooking itself and taking the atmosphere and charm out of the dining experience, they are clearly a trend that is here to stay, even if they are unlikely to replace traditional restaurants altogether.

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Business Interruption claim struck out as COVID-19 did not fall within the ‘Infectious Disease’ clause in a hotel’s insurance policy

The Newcastle Circuit Commercial Court recently considered a business interruption (BI) insurance issue that was not addressed by the Supreme Court in the FCA test case on BI policies (The Financial Conduct Authority v Arch Insurance (UK) Ltd & Others [2021] UKSC 1). In Rockliffe Hall Ltd v Travelers Insurance Co Ltd [2021] EWHC 412 (Comm), the judge considered whether there was cover for losses arising from the COVID-19 pandemic under a policy with a ‘closed list’ disease clause.

In summary, disease clauses provide cover for BI losses caused by infectious and contagious diseases that occur at an insured’s business premises (or within a specified distance or proximity from such premises).

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News & Events

Our Franchising team retains Band 1 ranking in Chambers Global

We are delighted to have been recognised in the latest edition of the Chambers & Partners Global Market Leaders guide, where we have again been ranked in Band 1. Partners Graeme Payne, Mark Abell and Melissa Murray have also been recognised as notable practitioners.

The Chambers Global guide notes that our team is "globally renowned with a strong presence in Europe, the Middle East and Asia", and "an accomplished franchise-related dispute resolution practice which is the first port of call for many international companies".

Many thanks to our clients who have provided feedback and helped us to maintain our top tier ranking.

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Our International Education team advises Benenden School on establishing itself in East Asia

Our International Education team, headed by Mark Abell, has advised Benenden School (a prestigious independent school for girls in England) on a deal to partner with the education arm of Hong Kong-based conglomerate Chow Tai Fook to develop and operate a number of Benenden-branded schools in China, Hong Kong, Macau and Taiwan under a franchising model.

Our team was fully involved over the course of more than 12 months in the negotiation and drafting process, from the initial MOU stage to completion of the full form documents. In doing so, our team co-ordinated specialist input on intellectual property, banking and education regulatory matters from across our London, Hong Kong and Shanghai offices.

This is the first international deal for Benenden School and secures its brand presence and ties within Asian markets that are likely to play an increasingly important role in the global education market in the decades to come.

We are currently working on another 15 deals like this, as well as three similar deals for universities across Asia and Latin America.

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Launch of the International Hotel Law Review

We are delighted to share the inaugural edition of the International Hotel Law Review, edited by Bird & Bird Partners Karen Friebe and Mark Abell, with contributions from our international Hotels, Hospitality & Leisure team and wider network.

The hotel sector has experienced significant change and continues to evolve, yet this is the first book of its kind focusing on the structuring and implementation of international growth in the hotel sector.

The book comprises a chapter on franchising in the hotel sector, as well as 11 country chapters contributed by our international Hotels, Hospitality & Leisure team and wider network, covering Canada, China, Denmark, France, India, Italy, Japan, Malaysia, Poland, Singapore, Switzerland. Click here to access the International Hotel Law Review.

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Are you attending the virtual IFA Legal Symposium?

We are looking forward to joining the Symposium on 4-6 May, where Partner Victoria Hobbs will be speaking in the breakout session "An A to Z update on the arbitration of international franchise disputes - what's new?". The session will consider best practices and “what’s new” in preparing for and dealing with contractual provisions (such as governing law and venue clauses, arbitration provisions), as well as the conduct of an international arbitration, such as panel selection, venue disputes, e-discovery, confidentiality, and enforcement.

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