The Regulation of Franchising in the New Global Economy

The Regulation of Franchising in the New Global Economy

Elizabeth Crawford Spencer

While franchising promotes economic and social welfare objectives, Elizabeth Crawford Spencer argues that monitoring and regulation are needed to address potential areas of abuse of the form that can result in costly market inefficiencies.

Chapter 8: Legislation Impacting Upon the Performance of and Exit from the Agreement

Elizabeth Crawford Spencer

Subjects: law - academic, intellectual property law


Legislation regulating the performance of the relationship is often referred to as ‘relationship’ or ‘conduct’ legislation. It establishes the rules that govern the franchisor/franchisee interaction after the contract has been signed. Such legislation typically alters the rights of parties, ‘to freely contract among themselves, setting ground rules on aspects of the relationship such as termination, non-renewal, rights of franchisees to form associations, purchasing requirements, transfer rights, and system expansion’.1 While many countries rely heavily on disclosure, a significant number do apply a mix of regulatory tools. The use of such tools is occasionally in lieu of, but more often in addition to, disclosure. Table 8.1 summarizes the principal types of conduct regulation directed towards the performance of the franchise relationship. Such measures include control over the content of contracts, prescribed performance provisions, and procedural requirements for dispute resolution, transfer and termination. PRESCRIPTIVE LEGISLATION Prescriptive legislation includes legislation directed towards the form and content of the contract, such as formal and language requirements, mandatory contract terms, consumer-protection legislation, and unfair contract terms legislation. It also includes prescriptive legislation with respect to particular issues such as confidentiality requirements, restrictive covenants, and protection for freedom of association for franchisees. 1 Barkoff and Selden, Fundamentals of Franchising (2nd ed, 2004). 263 M2454 - SPENCER TEXT.indd 263 17/11/2010 16:27 264 The regulation of franchising in the new global economy Table 8.1 JURISDICTION Conduct legislation worldwide Year of franchisespecific legislation Content Dispute control Resolution Prescribed provisions content of contract (including minimum term of the agreement)...

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