Gordon Drakes advises IP-rich businesses on protecting their brand, products and services and developing their businesses through multi-channel routes to market, such as franchising, joint ventures, strategic alliances, e-commerce, agency and distribution.
Gordon specialises in the expansion of businesses through franchising. In the past year, he advised a number of well known UK brands across a variety of sectors on their expansion into international markets such as India, Russia, the Middle East, the CIS and the Far East.
Gordon has a broad experience of commercial law and advises US clients regularly on their pan-European sales and distribution strategies as well as advising on sponsorship agreements and merchandise and manufacturing licences.
Gordon worked in house on secondment at MTV and BP, gaining valuable experiences of cross border commercial transactions. Gordon has lived and worked abroad, in both Austria and Japan.
Chambers & Partners 2013 ranks Gordon as an Associate to Watch in Franchising and Licensing.
Pre-contractual documents often contain a statement that they are not legally binding, and commercial contracts often contain a 'boilerplate' clause stating that any variations to the agreement must be in writing and signed by both parties. While these statements and clauses are useful and designed to create greater legal certainty, they are not bulletproof, as three recent Court of Appeal decisions illustrate.
Chancellor of the Exchequer Philip Hammond recently delivered the Autumn 2017 Budget, the first budget in the new annual tax policy-making cycle. Although there were no radical policy changes, some changes will affect the UK franchise business sector, particularly with regard to the tax treatment of royalties, corporate tax and the digital economy, environmental tax, value added tax and business rates.
A number of businesses which franchise will interact with the gig economy, particularly those which operate with a low entry threshold, such as contract cleaning and other service-based franchises. Both franchisors and franchisees in these sectors may have individuals working for them in this capacity, so they must be aware of existing issues and the regulations that will likely be introduced.
The Payment Practices and Performance Regulations 2017 require large UK businesses to report publicly twice yearly on their payment practices and performance. Large franchisors must ensure that they comply with this new regime. For franchise businesses which fall below the reporting threshold, the regulations are good news, as they are designed to improve and promote transparency and fairness in supply chain management.
The European Franchise Federation (EFF) recently adopted a new version of the European Code of Ethics for Franchising. The updated code aims to address some of the perceived imbalances and inequities in the franchise relationship and bring self-regulation into the digital age. However, although the British Franchise Association's (BFA's) interpretation of the code may include some variations from the EFF's text, much of the BFA's existing code and its practices are already in line with these updates.
Recent events have given the first real insight into the Brexit process. Franchise businesses should start preparing for the potential impact of Brexit by auditing their IP rights in the European Union and assessing their key contractual relationships with suppliers and franchisees. Preparations for the General Data Protection Regulation should continue and a watchful eye should be kept on events as they unfold.
Executed in the right way, a business's international franchising strategy can become a core asset, helping to secure the long-term future of the business as a global brand and hedging the impact of economic risks in the domestic market. However, such ventures must be carefully structured to reflect the needs of the business, the target market and the franchise partner.
The High Court recently considered whether two restrictive covenants relating to non-solicitation and non-competition imposed by an individual seller of a hair salon franchise in a share purchase agreement were enforceable. The judgment serves as a useful and informative discussion on a number of legal principles, such as contractual interpretation, restraint of trade and the enforceability of restrictive covenants.
Many franchise systems require franchisees to use specific types of equipment. In order to keep start-up costs to a minimum and enable franchisees to focus their resources on delivering the required products and services, franchisors might make the equipment available under a hire arrangement. However, franchisors must bear in mind that this activity may be regulated by the consumer credit regulatory regime and that the consequences of non-compliance can be severe.
As part of a drive to encourage the use of alternative dispute resolution in consumer disputes, the European Commission has developed a new online dispute resolution platform, which has been available for use since February 15 2016. The launch of the platform means that any consumer-facing franchise concept in which the franchisor or its franchisees transact with consumers online must now comply with the new regime.
In a recent landmark decision, the Supreme Court considered the long-established principles underlying the law relating to contractual penalty clauses. The judgment sets out a new, progressive test for determining whether a contractual provision will be considered penal (and therefore unenforceable), and has major implications for drafting, negotiating and enforcing English law franchise agreements.
Increasingly, when a franchise business is asked to identify its most valuable asset, it points to its customer data. However, handling customer data is likely to trigger the application of data protection and privacy rules. Franchise businesses which collect and use data from European citizens should be aware that the legal landscape is set to change dramatically with the implementation of the EU General Data Protection Regulation.
The government recently published a consultation regarding the reform of the energy tax and reporting schemes in the United Kingdom. One key proposal is to abolish the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) and the climate change levy in favour of a single consumption tax. This will be of interest to UK franchisors, whose networks may be subject to the CRC.
Franchise rights tend to be granted on a 'pure-play' basis – that is, the franchisee is granted the right to open and operate physical premises selling products and services in an allocated territory, with the franchisor reserving its rights in respect of other channels, such as e-commerce. However, this model is becoming increasingly outdated. Various options exist for bringing e-commerce into the franchise system.
The High Court recently called into question the reliability of exclusion clauses in standard-form business-to-business contracts by applying the Unfair Contract Terms Act. The ruling serves as a timely reminder to franchisors that reliance on these types of exclusion and limitation cannot be taken for granted and that their enforceability will ultimately be judged against the Unfair Contract Terms Act 'reasonableness' test.
A number of recent cases have reignited the debate over whether English law recognises a general duty of good faith in commercial contracts, including franchise agreements. This update considers the line taken by the courts in these cases, starting with Yam Seng Pte Limited v International Trade Corporation and concluding with the first post-Yam Seng case for good faith in the context of franchising.
The 2013 decision of the Competition and Markets Authority (CMA) to fine Mercedes-Benz and five of its dealers over £2.8 million for infringing UK competition law serves as a reminder that franchisors and their networks may infringe the competition rules. The level of the fine imposed also demonstrates that the CMA is paying closer attention to the activities of small and medium-sized enterprises.
Restrictive covenants are common in franchise agreements, seeking to protect goodwill and customer relationships by limiting the licensee's right to operate a competing business. Two recent cases in the English courts have considered the enforceability of restrictive covenants. This update considers the background of restrictive covenants in the context of franchising and discusses the implications of both judgments.
Social media platforms are a powerful tool for any business, but a number of legal risks can arise if they are misused, along with the potential to create more harm than good for a brand. For businesses that use third-party structures such as franchising, there is an additional layer of risk and opportunity. Franchisors should develop a clear online strategy while retaining ultimate control over their brand.
Increasingly in the future, when an international franchising business is asked to identify its most valuable asset, it may well point to its customer data. Good data protection compliance – when used together with other emerging technologies and customer engagement techniques – can thus be a significant enabler for franchisors by increasing customer trust and encouraging interaction.
Judgments in three recent cases have reignited the debate over whether English law recognises a general duty of good faith in commercial contracts, including franchise agreements. Franchisors and distributors should be aware of these developments and take caution before exercising contractual discretion, while bearing in mind that their longer-term relational contracts may be held to a high standard of performance, including a duty to disclose.