Elgar Intellectual Property Law and Practice series
Chapter 5: RE-ENGINEERING THE REGULATORY ENVIRONMENT FOR FRANCHISING IN THE EU
Franchising makes a positive contribution to the EU’s economy and has the potential to make a still greater contribution. An EU Franchise Directive should therefore promote and support the economic drivers that encourage franchisors and franchisees to become involved in franchising. It should also reduce the risks that face both franchisors and franchisees. In order to achieve this, the EU’s regulatory environment should clearly define franchising and be re-engineered by accentuating the influence of three commercial imperatives on the legislative eco-systems. These are market confidence in franchising, pre- contractual hygiene and a mandatory taxonomy of rights and obligations which ensures that an appropriate level of protection is afforded to both franchisors and franchisees. This necessitates a clear definition of what franchising is and a re-engineering process that results in environmental dynamics that are targeted, transparent, proportionate, accountable and consistent.1 In other words, the fundamental objective of an EU Franchise Directive must be to define franchis- ing as a specific, distinct and uniform business structure, to enable both franchisors and franchisees to access the advantages which encourage them to become involved in franchising and to reduce, but not remove, all of the risks involved. An over-regulated environment with no chance of market failure or financial scandals would be undesirable as it would stifle innovation and competition.
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