Q&A

[Q] After signing the franchise agreement, is there a cooling off period provided by law?
Jonathan Chadd is the head of franchising for Leathes Prior Solicitors.

[A] Unlike some jurisdictions the UK has no specific legislation governing franchising, which is, therefore, subject to the general commercial law. Franchisees are generally not treated as ‘consumers' and do not, therefore, enjoy the protection of legislation giving them a cooling off period following their signing of the franchise agreement.

The Trading Schemes Act (which was brought in to curb the worst excesses of multi level marketing and pyramid selling) inadvertently catches some franchising arrangements. To overcome this difficulty, an exception to the legislation was provided; if the franchisee is not registered for VAT and there are more than two levels to the franchise arrangement, the Trading Schemes Act may apply. In this case the franchisee may be entitled to a cooling off period under that legislation.

However, prospective franchisees should proceed on the basis that they will not be entitled to any cooling off period. They should take legal advice from a solicitor experienced in franchising and affiliated to the bfa, many of whom are prepared to provide fixed fee reports on the terms of the agreement. This will ensure that the franchisee fully understands the obligations they are taking when they sign the agreement.