Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Franchise definition

What does Franchise mean? In legal practice, a franchise most commonly means a commercial arrangement in which a franchisor licences a franchisee to run a business using the franchisor’s brand, system and know‑how under a franchise agreement. Typical legal features include an intellectual property licence, quality control and operational standards, fees (initial fee, continuing royalties and marketing contributions), territorial exclusivity or protection, non‑compete and non‑solicitation covenants, reporting obligations, and detailed provisions on term, renewal and termination. Across England & Wales, Scotland, Northern Ireland and Ireland there is no dedicated franchising statute; issues are governed by contract, IP and competition law (including rules on vertical...

Franchising under the Trading Schemes Act 1996: UK regulatory scope, exclusions (VAT/single-tier), sanctions and practical compliance for franchisors

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Practice notes

Introduction

This Practice Note sets out how the Trading Schemes Act 1996 (TSA 1996) applies in the franchise context. It also reviews the Fair Trading Act 1973 (FTA 1973), the Trading Schemes Regulations 1997, SI 1997/30, and the Trading Schemes (exclusion) Regulations 1997, SI 1997/31. TSA 1996, together with later regulations made under it, was enacted to curb pyramid selling schemes because, at the time, the measures within FTA 1973 were judged inadequate. Unintendedly, franchises may fall within TSA 1996, as they can be viewed as a ‘trading scheme’. The intention was to tackle such schemes, as the then pre-existing FTA 1973 regime was widely regarded as insufficient.

Trading schemes—what are they?

A trading scheme, for FTA 1973, s 118(8) as amended by TSA 1996, means any arrangements connected with carrying on a business, whether those arrangements are made or recorded wholly or partly in writing, or not. That broad characterisation seems to capture almost every agreement that businesses enter into, although not all such trading schemes are regulated. FTA 1973, s 118(1) confirms that TSA 1996 only bites on trading schemes if:

the prospect is offered to ‘participants’ (which, in a franchise, will be franchisees) of receiving payment or...

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John Pratt

Hamilton Pratt

John is the senior partner of Hamilton Pratt, Europe's largest specialist franchise law firm. He is the immediate past Legal Advisor to the British Franchise Association and a past Chair of the International Bar Association's International Franchise Committee and Director of the American Bar Association's International Franchising Division. He is currently Chair of Euro Franchise Lawyers. He has written 'Franchising: Law & Practice', 'The Franchisor's Handbook' and contributed chapters to a number of franchise publications. He is the joint editor of a recently published American Bar Association publication on franchising in Europe. Who's Who Legal has recently rated John as Europe's leading franchise lawyer....

Web page updated on 21/05/2026

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