Franchise Arrangements
Irish Franchise Association Code of Ethical Conduct
Code of Ethical Conduct: Extension and Interpretation
The extension and interpretation forms an integral part of the code of Ethical conduct adopted by the Irish Franchise Association and to which its members must adhere.
1. Application
This Code of Ethical Conduct forms part of the membership agreement between the Irish Franchise Association and its member companies. It does not form part of the contractual agreement between franchisors and franchisees unless expressly stated in the franchise agreement. Neither should anything in this code be construed as limiting a Franchisor’s right to sell or assign its interest in a franchised business.
2.Disclosure
The objectivity of recruitment literature (clause 3.2) refers specifically to publicly available material. It is recognized that in discussing individual business projections with franchisees, franchisors are invariably involved in making assumptions which can only be tested by the passage of time.
3. Confidentiality
For the generality of this Code of Ethical Conduct “know how” is taken as being defined in the European Block exemption to Article 85 of the Treaty of Rome. However, for the purpose of Article 3.4 of the European Code of Ethics it is accepted that franchisors may impose non competing and secrecy clauses to protect the information and systems where they may be reasonably regarded as material to the operation of the franchise contract.
4. Contract Language
Franchisors should seek to ensure that they offer franchisees contracts in a language in which the franchisee is competent.
5. Contract Terms
It is suggested in Article 5.4 of the European Code of Ethics that the minimum term for a franchise contract should be the period necessary to amortise those of a franchisee’s initial investment which are specific to the franchise, it is recognized
• that for a minority of the largest franchise opportunities amortising initial investments may not be a primary objective for the franchisee. In such cases the objective should be to adopt a contract period which reasonably balances the interests of the parties to the contract.
• That this section could be subject to national laws concerning the restraint of trade and may need to be met through renewal clauses.
6. Contract Renewal.
The basis for contract renewal should take into account the length of the original term, the extent to which the contract empowers the franchisor to require investment from the franchisee for refurbishment or renovation, and the extent to which the franchisor may vary the terms of the contract on renewal. The overriding objective is to ensure that the franchisee has the opportunity to recover his franchise specific initial and subsequent investments and to exploit the franchised business as long as the contract persists.
Additional Commitments
1. The Irish Franchise Association’s Code of Advertising Practice will be based on that established by the Advertising Standards Authority for Ireland and shall be modified from time to time in accordance with alterations notified by the ASAI.
The Irish Franchise Association will subscribe fully to the ASAI Code, unless, on some specific issue, it is resolved by a full meeting of the Council of the Irish Franchise Association that the ASAI is acting against the best interests of the public and of franchising business in general on that specific issue. In this case the Irish Franchise Association will be required to formally notify the ASAI setting out the grounds for disagreement.
2. No member shall sell, offer for sale or distribute any product or render any service, or promote the sale of distribution thereof, under any representation or condition (including the use of the name of a celebrity) which has the tendency, capacity or effect of misleading or deceiving purchasers or prospective purchasers.
3. No member shall imitate the trademark, trade name, corporate identity, slogan or other mark of identification of another franchisor in any manner or form that would have the tendency or capacity to mislead or deceive.
4. Full and accurate written disclosure of all information material to the franchise relationship shall be given to prospective franchisees within a reasonable time prior to the execution of any binding documents.
5. The franchise agreement shall set forth clearly the respective obligations and responsibilities of the parties and all other terms of the relationship and be free from ambiguity.
6. The franchise agreement and all matters basic and material to the arrangement and relationship thereby created, shall be in writing and executed copies thereof given to the franchisee.
7. A franchisor shall select and accept only those franchisees who, upon reasonable investigation, possess the basic skills, education, personal qualities and adequate capital to succeed. There shall be no discrimination based on race, colour, religion, national origin or sex.
8. A franchisor shall exercise reasonable surveillance over the activities of his franchisees to the end that the contractual obligations of both parties are observed and the public interest safeguarded.
9. Fairness shall characterise all dealings between a franchisor and its franchisees. A franchisor shall give notice to its franchisee of any contractual breach and grant reasonable time to remedy default.
10. A franchisor shall make every effort to resolve complaints, grievances and disputes with its franchisees with good faith and goodwill through fair and reasonable direct communication and negotiation.
8. Adoption
This Code of Ethical Conduct comprises this Extension and Interpretation and the European Code of Ethics for franchising and was adopted by the Irish Franchise Association [on / / ]