Report on Hardwicke Building’s Third Annual Franchising Conference

The third annual Hardwicke Building Franchising Conference ‘Dunkirk or D-Day?  Franchising in an Economic Downturn’ took place on 2 June 2009.  It comes at a time when both franchisors and franchisees are starting to feel the impact of the economic downturn on their businesses.  Despite these difficult times, the annual Franchising Conference aims to provide some clarity for all those involved in franchising.  The conference consisted of six sessions, chaired by Graham Cunningham, a barrister at Hardwicke Building, and member of the franchising team.

The conference was introduced by Nigel Jones QC, Head of Chambers at Hardwicke Building, who detailed some of the common problems that can arise.  Difficult economic conditions create tensions on both sides of the franchise relationship, and there can be a temptation to turn to termination as soon as problems arise.  However, through more effective communication and dispute resolution, all parties to the franchise agreement will be better placed to deal with problems before they get out of hand.

Against this background, the first session, entitled ‘Apocalypse Now?’, looked at the problems which arise when the franchisor becomes insolvent.  This session was led by Sarah McCann and Edward Rowntree, both barristers at Hardwicke Building.  Between them they gave a detailed examination of the different corporate insolvency regimes in place, and the process by which transactions can be set aside, often years after the liquidation of the franchisor.  Franchisors were also reminded of the potential sanctions available against them, including under the Company Directors Disqualification Act 1986, which can affect both directors and those considered by the court to be de facto or shadow directors.

The second session of the day was run by Barney Laurence from Sherrards Solicitors.  Under the title of ‘Saving Private Ryan’, the session dealt with some of the practical steps which should be taken by franchisors to ensure that that franchisee stays clear of financial difficulty.  Reflecting on the suggestions made by Nigel Jones QC in his introduction, the session also considered the importance of taking proactive steps to avoid problems, before the option of termination is considered.

This session was followed by Sara Benbow and John de Waal, barristers at Hardwicke Building, who asked whether it is ‘A Bridge too Far’ for franchisors to attempt to take on the property interests of a franchisee in the wake of a terminated franchise.  Four situations were examined in which the property interests of a struggling franchisee could potentially be disclaimed or assigned by the franchisor, and the various tactical and legal considerations arising from each one.

The fourth session, entitled ‘Full Metal Jacket’, was run by John Pratt, a partner at Hamilton Pratt.  The session considered the issue of how best to structure franchise agreements in order to provide the franchisor with the most effective protection.  Again the theme of taking a practical approach to resolving difficulties was repeated, through underlining some of the shortcomings of relying on too strict an interpretation of the franchise agreement.  This was illustrated by a stark reminder of the costs involved in terminating a franchise, compared to various self-help remedies.

After lunch in the fifth session, Brie Stevens-Hoare, a barrister at Hardwicke Building, and Russell Ford of Owen White Solicitors demonstrated how a relatively simple claim can quickly spiral into a complex action.  In ‘All Quiet on the Western Front’, the case of Peart Stevenson Associates Ltd v Holland [2008] EWHC 1868 (http://www.bailii.org/ew/cases/EWHC/QB/2008/1868.html) was taken as an example of some of the tactical and evidential difficulties faced when trying to prove an allegation of misrepresentation on the part of the franchisor.

In the sixth and final session of the day,  Alexander Goold, a barrister at Hardwicke Building, gave his own ‘Dirty Dozen’ examples of practical ways to streamline a franchise network.  In the wake of the credit crunch, the need for franchisors to root out underperforming franchisees is more important than ever.  However, the reverse side of the coin is that franchisors must ensure their sales material is factually truthful and accurate, and that paperwork is kept up to date.

Finally, the day ended with a lively and informative plenary session under the title of ‘The Dambusters’, chaired by Nigel Jones QC and including speakers from the previous sessions.  The session dealt with a wide range of questions concerning the issues raised during the day.  These included the role of alternative dispute resolution clauses in franchise agreements, the status of minimal performance clauses and the fine line between supporting a franchisee and becoming a shadow director, with its resulting liabilities.

Delegates are reminded that the Hardwicke Building Franchising Conference will be returning next year.  Whether or not the economic recovery has begun by then, there are sure to be plenty of issues to deal with and new developments to consider.

For further information please do not hesitate to contact Marketing Manager Louise Poppelwell on 020 7691 0301 or by email to Louise.Poppelwell@gatehouselaw.co.uk.

For further information on Hardwicke Building’s Franchising Team please click here.

Thom Dyke will start pupillage at Hardwicke Building from October 2009.