Corporate Businesses and Franchisees: Regulatory Environment

Debate between Gareth Thomas and Navendu Mishra

Wednesday 2nd July 2025 Commons Chamber

[Gareth Thomas]

My hon. Friend will forgive me, but I will not comment on the particular circumstances of Vodafone and its relationship with franchisees in general, or those former franchisees who are bringing court action. However, I note his comment.

[Navendu Mishra]

I have worked with the Minister on a number of issues relating to his ministerial role, and he has always been helpful and proactive. As he is representing His Majesty’s Government, does he feel that there is a need to legislate on this issue, and that the code of conduct simply does not go far enough? Also, as my hon. Friend the Member for North Durham (Luke Akehurst) has just said, there might be cases of larger corporations opting in and out as and when it suits them.

[Gareth Thomas]

As I said, I recognise that this case has raised concerns across the House about the quality and effectiveness of the legislation that governs franchisees and, indeed, other businesses, and about the arrangements around franchisees, and their relationships. As I say, up to now, we have not had significant representations that the quality of regulation of franchises is not adequate. However, I recognise the concerns across the House that this case has brought up, and as a result, I will track very carefully how the court case unfolds.

I was noting the advantages that, on occasion, self-regulation brings. They include freedom when it comes to contracting. Individuals and businesses have the right to enter into agreements and set their own terms, free from unnecessary Government interference. That freedom allows franchise agreements to be tailored to individual needs. People can set up shop more easily on the high street or elsewhere with the power of a big brand behind them. On the whole, self-regulation also allows the franchise industry to set standards and guidelines based on deep, industry-specific expertise. It allows the industry to adapt more quickly to market changes, too.

It is my understanding that the franchise agreements are the main instruments governing the relationship between franchisors and franchisees. Those agreements normally cover key issues such as fees, territory rights, contract duration and dispute resolution mechanisms. The Government of course encourage anyone entering a business contract such as a franchise to seek independent legal advice before agreeing to the terms and conditions laid out in those agreements.

I have talked a little bit about self-regulation and its benefits, and I alluded earlier to the fact that there are existing protections in law that cover all businesses, including franchises. For example, under the Misrepresentation Act 1967, anyone who has entered into a contract as a result of misrepresentation may be able to rescind the contract and claim damages. Misrepresentation is a false statement by one party to another that induces that person to enter the contract. Ultimately, it would be for the courts to decide whether a misrepresentation had occurred and what the remedy would be. There are other forms of legislation, too, including the Unfair Contract Terms Act 1977, which may apply to business-to-business contracts. That references the application of a reasonableness test, but that again is a matter for dedicated legal advice.