TRW & Co · Corporate & Commercial
Franchising, Agency and Distribution Solicitors in London
Franchise solicitors London brands, franchisees and suppliers instruct help them choose between franchising, commercial agency and distribution, then draft contracts that protect the brand and price the exit. The UK has no franchise statute, but the Commercial Agents Regulations, competition law on vertical agreements and misrepresentation law all shape what a network can safely do.
Key pointCalling an intermediary a distributor does not stop the Commercial Agents Regulations applying: if it has continuing authority to negotiate sales of goods for you, it may be entitled to statutory compensation on termination valued as the price of the agency.
At a glance
No UK franchise statute
England and Wales has no franchise-specific law or mandatory disclosure document; contract, IP, competition and misrepresentation law govern franchise relationships.
Agents' termination rights
Commercial agents selling goods get minimum notice and, by default, compensation on termination unless the contract provides for a capped indemnity.
One-year claim window
An agent loses its compensation or indemnity entitlement if it does not notify the principal within one year of termination that it intends to claim.
30% block exemption limit
The Vertical Agreements Block Exemption Order 2022 covers agreements where supplier and buyer market shares each stay at or below 30%.
No resale price fixing
Fixed or minimum resale prices are hardcore restrictions; they remove block exemption cover for the whole agreement and risk CMA enforcement.
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What franchising, agency and distribution cover
Franchise solicitors London brands and investors instruct work on the contracts that take a product or business model to market through other people. Franchising, commercial agency and distribution are three different routes, and English law treats each one differently. Choosing the wrong model, or drafting the right model badly, can mean unexpected compensation claims, competition law exposure or loss of control over the brand.
In a franchise, the franchisor licenses its brand, system and know-how to a franchisee, who runs an independent business in return for fees and royalties. In a commercial agency, an agent negotiates or concludes sales on the principal's behalf, and the principal contracts with the customer. In a distribution arrangement, the distributor buys goods from the supplier and resells them on its own account, taking the stock and credit risk.
These arrangements become legal questions at three points: when the network is designed, when a relationship is terminated, and when the business is sold or expands abroad. Our commercial contracts team advises on all three, and our article on agency or distribution agreements compares the models in more depth.
Comparing franchising, agency and distribution
The commercial model drives the legal consequences. The table below summarises the key differences under English law.
| Feature | Franchise | Commercial agency | Distribution |
|---|---|---|---|
| Who contracts with the customer | Franchisee, in its own name | Principal (agent negotiates or concludes) | Distributor, in its own name |
| Control over operations | High: detailed operations manual and brand standards | Principal sets prices and terms | Limited: competition law restricts resale price control |
| Specific UK legislation | None specific to franchising | Commercial Agents (Council Directive) Regulations 1993 for goods | None specific; general contract and competition law |
| Termination payments | Contractual only | Statutory compensation or indemnity | Contractual only |
| Main competition law tool | Vertical Agreements Block Exemption Order 2022 and guidance | Genuine agency usually outside Chapter I | Vertical Agreements Block Exemption Order 2022 |
| Typical revenue | Initial fee plus ongoing royalties and marketing levy | Commission | Margin between purchase and resale price |
The legal framework in England and Wales
No franchise-specific statute
Unlike the United States, Australia and several EU member states, the UK has no legislation specific to franchising and no mandatory pre-contract disclosure document. Franchise relationships are governed by general contract law, intellectual property law, competition law and consumer law. Many franchisors join the British Franchise Association, which requires members to follow its code of ethics, but this is a voluntary self-regulatory framework rather than law.
The absence of a statute does not mean the absence of risk. Pre-contract statements about earnings, site performance or support can found claims under the Misrepresentation Act 1967. Exclusion clauses in standard terms may be tested for reasonableness under the Unfair Contract Terms Act 1977. Post-termination restrictions must be no wider than reasonably necessary to protect legitimate interests, or they will be unenforceable restraints of trade.
The Commercial Agents Regulations
The Commercial Agents (Council Directive) Regulations 1993 protect self-employed agents with continuing authority to negotiate, or negotiate and conclude, the sale or purchase of goods on a principal's behalf. After a consultation, the Department for Business and Trade confirmed in early 2025 that the Regulations will remain in force without amendment.
The Regulations set minimum notice periods for indefinite contracts: one month in the first year, two months in the second year commenced, and three months in the third year commenced and after. On termination, an agent is entitled to compensation unless the contract provides for an indemnity instead. An indemnity is capped at one year's remuneration based on the agent's average annual remuneration over the preceding five years, or the shorter period of the contract. An agent loses the entitlement if it does not notify the principal within one year of termination that it intends to pursue it.
Compensation is often the larger exposure. In Lonsdale v Howard & Hallam Ltd [2007] UKHL 32, the House of Lords held that compensation reflects the value of the agency at termination, assessed by reference to what a hypothetical purchaser would pay for it.
Competition law and vertical agreements
Franchise and distribution agreements are vertical agreements, and restrictions in them must comply with the Chapter I prohibition in section 2 of the Competition Act 1998. The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022, which took effect on 1 June 2022 and is due to expire in 2028, provides a safe harbour where neither the supplier's nor the buyer's market share exceeds 30% and the agreement contains no hardcore restrictions.
Hardcore restrictions include fixing minimum or fixed resale prices and certain restrictions on the territories or customers to which a buyer may sell. Including a hardcore restriction removes the benefit of the block exemption for the whole agreement. Other restrictions, such as non-compete obligations that are indefinite or exceed five years, are excluded restrictions: they fall outside the exemption but the rest of the agreement can still benefit. Franchise agreements receive specific treatment in the guidance of the Competition and Markets Authority, which recognises that some restrictions are needed to protect the franchisor's know-how and network identity.
Intellectual property and consumer law
A franchise is built on intellectual property. Registered trade marks under the Trade Marks Act 1994, copyright in manuals and materials, and confidential know-how are the assets being licensed. Franchisors should register marks in every territory before launch; our article on registering a trade mark in the UK explains the process, and our trade marks team handles filings. Where franchisees sell to consumers, the Digital Markets, Competition and Consumers Act 2024 gives the CMA direct enforcement powers, so network-wide pricing and marketing practices need review.
Key terms franchise solicitors London networks negotiate
Franchise solicitors London franchisors and franchisees use focus negotiation on the terms that allocate control, revenue and exit. These provisions apply, with adjustments, to distribution agreements too.
Territory and exclusivity
Define the territory, whether it is exclusive, and what online and passive sales are permitted. Territorial protection must be drafted to fit within the block exemption and avoid hardcore restrictions.
Fees and royalties
Set the initial fee, ongoing royalty basis, marketing fund contributions and audit rights. Make the turnover definition precise, including online and delivery sales.
Operations manual
The manual sets brand standards and can be updated. Give the franchisor a right to vary it within reasonable limits, and protect it as confidential know-how.
Term and renewal
The term should allow the franchisee to recover its investment. Renewal conditions, such as refurbishment and compliance history, should be objective.
Post-term restrictions
Non-compete and non-solicit covenants protect the network after exit, but must be limited in time, place and scope to be enforceable and compliant with competition law.
Transfer and step-in
Control over sale of the franchised business, rights of first refusal, and step-in rights on default or death protect the network and preserve value.
Our article on franchise agreements in the UK walks through these terms in more detail, and our guide to limitation of liability clauses covers risk allocation.
Launching a franchise or distribution network: the process
- Test the model. Confirm the business is replicable and profitable through pilot sites, and decide whether franchising, agency, distribution or a mix best suits each market.
- Protect the brand. Register trade marks in the UK and target markets, secure domain names, and ensure copyright and know-how are owned by the franchisor entity.
- Structure the group. Decide which company holds the IP, which grants the licences, and whether master franchisees or area developers will be used abroad. Take tax advice on royalty flows.
- Prepare documents. Draft the franchise or distribution agreement, operations manual, disclosure materials, deposit agreement and any lease or supply arrangements.
- Review competition and consumer compliance. Check market shares, territorial and pricing restrictions, online sales rules and consumer-facing practices before roll-out.
- Recruit carefully. Keep recruitment materials accurate, avoid unsupported earnings claims, and keep a record of what was disclosed to each candidate.
- Manage the network. Monitor compliance, handle breaches consistently, renew or terminate in line with the agreement, and update documents as the law and business change.
Keep a disclosure file for every franchisee or distributor. Recording the financial projections, assumptions and caveats you provided, and the date they were provided, is the most effective defence to a later misrepresentation claim. It also helps when a buyer of your business conducts due diligence on the network.
Documents and evidence to assemble
Before instructing franchise solicitors London businesses should gather the following so that advice can be specific from the outset.
- Trade mark registrations and applications in each target country, with ownership details.
- The current operations manual, brand guidelines and training materials.
- Financial data from pilot or company-owned sites, with the assumptions behind any projections.
- Existing agency, distribution or franchise agreements, including any side letters.
- Market share estimates for the relevant product and geographic markets.
- Supply chain contracts, approved supplier lists and any rebate arrangements.
- Details of any disputes, terminations or complaints within the network.
In franchising and distribution, the most expensive clause is often the one that was never drafted: what happens when the relationship ends.
Risks and common mistakes
Accidentally creating a commercial agency
Businesses sometimes call an arrangement "distribution" or "referral" when, in substance, the intermediary has continuing authority to negotiate sales of goods on the principal's behalf. The label is not decisive. If the Regulations apply, the intermediary may be entitled to minimum notice and compensation on termination, even if the contract says otherwise. Review how the relationship operates in practice, including who sets prices, who holds stock and who contracts with customers. If agency is intended, decide whether an indemnity is preferable to compensation and say so expressly in the contract.
Controlling resale prices
Suppliers and franchisors often want consistent pricing across a network. Imposing fixed or minimum resale prices is a hardcore restriction and can lead to CMA enforcement and fines. Recommended or maximum prices are generally permitted, provided they do not operate as fixed or minimum prices through pressure or incentives. Franchise networks running short-term coordinated promotions should take advice on structuring them. Train account managers, because informal emails and calls are often the evidence in enforcement cases. Our competition law team can review pricing policies.
Overstating earnings potential
Franchisees often invest savings, borrowings or redundancy payments in a franchise. If the business underperforms, the first question is what they were told. Projections that are not based on reliable data, or that omit material assumptions, can found claims in misrepresentation or negligent misstatement, leading to rescission or damages. Entire agreement and non-reliance clauses help but are not a complete defence, particularly where statements were made fraudulently or the clause fails a reasonableness test. Base projections on real site data, state the assumptions and encourage independent advice.
Unenforceable post-term covenants
A covenant preventing a former franchisee from running any competing business anywhere in the UK for several years is unlikely to be upheld. Courts enforce restrictions that protect legitimate interests, such as know-how and goodwill, and go no further than reasonably necessary. Competition law adds a separate constraint on post-term non-competes. Tailor covenants to the franchised premises or territory and to a period that reflects how long the know-how remains valuable. Consider whether a franchisor option to take over the premises protects the network better.
Terminating without a clear contractual route
Franchise and distribution agreements are often terminated for poor performance or breach of standards. If the agreement does not set objective performance criteria, notice and cure periods, and the consequences of termination, the terminating party risks a claim for wrongful repudiation. Follow the contractual procedure exactly, keep evidence of breaches and warnings, and plan for transition of customers, stock, premises and data. Our contract disputes team advises when a termination is contested.
Buying, selling and restructuring a network
Franchise and distribution networks are valuable assets, and they change hands. When a franchisor or supplier is sold, the buyer's franchise solicitors London deal teams engage will review every network agreement for change of control clauses, assignment restrictions, exclusivity commitments and termination rights that could be triggered by the sale.
Due diligence should test whether the agreements are consistent across the network, whether any arrangements are in substance commercial agencies with compensation exposure, whether pricing or territorial practices raise competition law risk, and whether the franchisor actually owns the trade marks and know-how it licenses. Inconsistent side letters and informal concessions to individual franchisees are a common finding and can affect price.
Franchisees selling their own unit also need advice. Most agreements require the franchisor's consent to a transfer, give it a right of first refusal and require the buyer to sign the then-current form of agreement, which may carry different fees. Our buying and selling a business team handles both sides.
Restructuring a network, for example converting distributors into franchisees or bringing territories back in-house, requires careful sequencing of terminations, notice periods and new contracts. Done badly, it can trigger compensation claims and disputes across the whole network at once.
International expansion and the Bangladesh connection
Many UK brands expand internationally through master franchises or exclusive distributors, and overseas brands enter the UK the same way. International agreements must consider local franchise disclosure laws, foreign exchange controls on royalties, tax withholding, trade mark ownership and the enforceability of an English judgment or arbitration award in the counterparty's country.
TRW & Co is headquartered in Dhaka. UK brands entering Bangladesh typically appoint a local master franchisee or distributor, and Bangladeshi brands increasingly look to the UK diaspora market. In Bangladesh, outward remittance of royalty, franchise and technical fees is subject to foreign exchange rules and, depending on the arrangement, approval or reporting through the Bangladesh Investment Development Authority, so payment terms must be designed around the approval process. Trade marks should be registered with the Bangladeshi trade mark registry before launch. Our pages on UK–Bangladesh trade and finance and Bangladesh supply chains explain the wider framework.
For networks extending to the EU, the Gulf, Singapore or China, local franchise registration or disclosure rules may apply, and some jurisdictions require local agents or sponsors. We coordinate English-law master agreements with local counsel so that the network is consistent and enforceable in each market.
How TRW & Co's franchise solicitors in London help
As franchise solicitors London brands and operators instruct, we act for franchisors, franchisees, suppliers, distributors, principals and agents. We give clear advice on risk and leverage, without promising outcomes.
- Network design: choosing between franchise, agency and distribution models for each market, and structuring IP and royalty flows.
- Documentation: franchise, master franchise, area development, agency and distribution agreements, operations manual reviews and recruitment materials.
- Compliance: competition law reviews of pricing, territories and online sales, and consumer law checks on network marketing.
- Brand protection: trade mark strategy with our intellectual property team.
- Termination and disputes: agent compensation claims, franchisee misrepresentation claims, enforcement of covenants and injunctions. Where advocacy in the higher courts is required, we instruct specialist counsel.
- Transactions: due diligence on franchise and distribution networks when businesses are bought or sold.
See our full list of practice areas or contact our London office at Holborn Gate, 330 High Holborn, London WC1V 7QH, or email info@trw.co.
Checklist for decision-makers
Use these questions to test a proposed or existing network. Franchise solicitors London clients consult will usually work through each one before documents are finalised.
- Have we chosen the right model for each market, and does our day-to-day practice match the contract label?
- Are our trade marks registered, in the right entity's name, in every territory?
- Do our market shares stay within the 30% block exemption threshold, and have we removed hardcore restrictions?
- If we use commercial agents, have we chosen between indemnity and compensation and priced the exit?
- Are earnings projections supported by real data, with assumptions disclosed and recorded?
- Do post-term covenants protect legitimate interests without going further than necessary?
- Can we terminate for poor performance on objective criteria with clear cure periods?
- For overseas partners, have we checked royalty remittance rules, withholding tax and enforcement of awards?
Getting these points right at the design stage is far cheaper than resolving them in a dispute. Franchise solicitors London networks involve early can usually build these protections into standard documents.
Frequently asked questions
01Is franchising regulated in the UK?
There is no franchise-specific legislation in England and Wales and no mandatory pre-contract disclosure document. Franchise relationships are governed by general contract law, intellectual property law, competition law, misrepresentation law and, where franchisees deal with consumers, consumer protection law. Many franchisors are members of the British Franchise Association, which requires them to follow its code of ethics, but membership is voluntary. Overseas markets often have their own franchise disclosure or registration laws, which must be checked before expansion.
02What is the difference between an agent and a distributor?
A commercial agent negotiates or concludes sales on the principal's behalf, and the customer contracts with the principal. The agent earns commission and does not take stock risk. A distributor buys goods and resells them in its own name, earning a margin and bearing stock and credit risk. The distinction matters because agents selling goods are protected by the Commercial Agents Regulations, including statutory compensation on termination, while distributors' rights are generally contractual.
03How much compensation does a commercial agent get on termination?
There is no fixed formula. Under the Commercial Agents Regulations, compensation is the default unless the contract provides for an indemnity. The House of Lords in Lonsdale v Howard & Hallam held that compensation reflects the value of the agency at termination, assessed by what a hypothetical purchaser would pay for it. An indemnity, by contrast, is capped at one year's remuneration based on average annual remuneration over the previous five years or the shorter contract period. Each case depends on the agency's earnings and prospects.
04Can a franchisor set the prices franchisees charge?
Generally a franchisor can recommend prices or set maximum prices, but imposing fixed or minimum resale prices is a hardcore restriction under competition law. It removes the benefit of the Vertical Agreements Block Exemption Order for the whole agreement and can lead to CMA fines. Some coordinated short-term promotions in franchise networks may be permissible with careful structuring. Franchisors should take advice before introducing network-wide pricing policies and train staff not to pressure franchisees on price.
05Are post-termination non-compete clauses in franchise agreements enforceable?
They can be, if they protect a legitimate interest such as the franchisor's know-how or goodwill and are no wider than reasonably necessary in duration, geography and scope. Courts will not enforce a broad restriction that simply stops a former franchisee earning a living. Competition law adds its own limits on non-compete obligations in vertical agreements. A covenant tied to the franchised premises or territory, for a limited period, is far more likely to be upheld than a national ban.
06What should a franchisee check before signing?
A prospective franchisee should check the franchisor's trade mark ownership, financial standing and track record, speak to existing and former franchisees, test the financial projections against independent evidence, and understand all fees, including royalties, marketing levies and required purchases. The agreement's term, renewal conditions, territory protection, termination rights, transfer restrictions and post-term covenants should be reviewed carefully. Independent legal and accounting advice before signing is strongly recommended, since most franchise agreements are offered on standard terms.
07Can royalties from a Bangladeshi franchisee be paid to the UK?
Yes, but outward remittance of royalty, franchise and technical fees from Bangladesh is subject to foreign exchange regulation and, depending on the arrangement, approval or reporting through the Bangladesh Investment Development Authority and the authorised bank. Tax withholding may also apply, subject to the UK–Bangladesh double taxation agreement. The franchise agreement should allocate responsibility for obtaining approvals, gross-up or withholding, and what happens if remittance is delayed. Local advice should be taken before signing.
Sources and official materials
- Commercial Agents (Council Directive) Regulations 1993 — Notice, compensation and indemnity for commercial agents
- Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022 — Block exemption for vertical agreements
- Competition Act 1998, section 2 — Chapter I prohibition on anti-competitive agreements
- Misrepresentation Act 1967 — Remedies for pre-contract misrepresentation
- Trade Marks Act 1994 — UK registered trade marks and licensing
- Unfair Contract Terms Act 1977 — Reasonableness test for exclusion clauses
- British Franchise Association — Voluntary self-regulatory body for UK franchising
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.