The UK franchising industry has grown rapidly over the past two decades, but that growth has happened in a near-total regulatory vacuum. While franchising can be a legitimate and mutually beneficial commercial model, the absence of oversight has allowed serious misconduct, structural exploitation, and deceptive business practices to flourish. From convicted fraudsters selling “franchises in a box,” to associations boosting credibility without exercising authority, to misleading business models that leave investors worse off, the warning signs are flashing. And it is getting worse.
This article explains why the UK franchising sector urgently needs government intervention, why voluntary associations are insufficient, and what regulatory measures would bring fairness and safety for both genuine franchisors and their franchisees.
Why Is Regulation Needed in UK Franchising?
Regulation is desperately needed because the UK franchise sector currently allows unqualified, unscrupulous, and sometimes criminal individuals to operate freely as franchisors and franchise advisers, resulting in widespread misrepresentation, investor harm, and systemic power imbalance. Practices that would be highly illegal in the investment and finance fields are rife.
The UK is one of the few developed economies with no franchise-specific laws. This vacuum enables bad actors to flourish, legitimate brands to be overshadowed, and franchisees to fall into financial and psychological distress. Without regulation, the franchising landscape automatically favours the franchisors who have money and legal resources and disadvantages the franchisees, leaving many financially ruined and, in many cases, emotionally scarred.
How Can Convicted Fraudsters be Allowed to Operate Openly as Franchise Consultants?
They exploit the lack of screening, licensing, or qualifications required to call oneself a “franchise consultant,” meaning even convicted fraudsters can sell consultancy services and turnkey “franchise in a box” packages to unwitting business owners.
This is one of the most alarming realities in UK franchising. Because anyone can set up as a consultant:
- Individuals with criminal convictions for fraud present themselves as experts.
- They offer template-based franchise packages to inexperienced business owners.
- They ignore commercial viability and sell franchising as a get-rich-quick strategy.
- They can generate income even when the franchising models that they help to create are doomed from the outset.
In many cases, these consultants position themselves as industry leaders through social media, sponsored events, and paid memberships in franchise associations, giving them a veneer of legitimacy despite their histories.
How Common Is Misrepresentation in UK Franchising?
Misrepresentation is widespread, and several legal cases, such as Pistachios In the Park Ltd & Anor v Sharn Panesar Ltd EWHC (QB) and Ali v Abbeyfield V.E. Limited EWHC (Ch), demonstrate how franchise buyers are frequently misled about key facts, financial projections, and business realities. In both of these cases the misrepresentation was found to be fraudulent.
Because franchisors are not legally required to disclose historical data, failure rates, actual financial performance, or the number of franchisees who have left the network, it is easy for them to:
- Overstate profitability
- Downplay risk
- Hide previous franchise failures
- Withhold the real financial condition of the franchise
These court cases highlight systemic issues rather than isolated incidents. Without mandatory transparency, franchisees often only discover the truth when they are financially and emotionally invested and it is too late to back out.
Do Franchise Associations Regulate the Industry?
No. The British Franchise Association (BFA), the best-known UK association only represents a fraction of the industry. It has no statutory authority and no regulatory power.
The BFA is a voluntary body funded by member fees. While it provides credibility to members, its membership screening is not monitored by any external regulator. That means:
- Membership does not guarantee ethical behaviour.
- The vetting process is based on documentation provided by the franchisor itself.
- There is no adequate oversight to ensure that what a franchisor claims is accurate.
Other associations, such as the Quality Franchise Association (QFA), have even less authority, yet many unethical franchisors and consultants use their logos to imply legitimacy.
This lack of independent supervision leaves both franchisees and the public vulnerable.
Why Is the International Franchise Association Not a Safeguard?
The International Franchise Association (IFA) is also not a regulatory body and often lacks rigorous due diligence, as demonstrated when it invited a franchise consultant, who was known to be a jail-time-served fraudster, to exhibit and be a keynote speaker at its London exhibition.
This incident illustrates the global nature of the problem: franchise events and associations sometimes prioritise sponsorships, membership fees, and filling speaker slots over protecting attendees from unethical and fraudulent operators.
When someone with a criminal record for fraud is positioned as an industry expert on an international stage, it sends a dangerous message. Credibility in franchising can be bought, not earned.
What Is the Problem With Non-Exclusive (Non-Territorial) Franchise Models?
Non-territorial franchise models remove an investor’s ability to build a business with market value and they allow franchisors to sell unlimited licences, saturating the market at the franchisee’s expense.
Traditional franchise business models operate on the basis of the franchisor awarding exclusive territories: a franchisee is given a protected area where no other franchisee may operate. But a newer and deeply problematic model has emerged in sectors like:
- Travel agencies
- Property lettings
- Recruitment
- Various forms of therapy
- Mental wellbeing consultancies
Franchisors now sell non-exclusive rights, claiming this offers flexibility. In reality:
- The franchisor can sell unlimited numbers of franchisees.
- No franchisee can establish a protected customer base.
- The ability to grow and resell the business is destroyed.
- Franchisees are set up to cannibalise one another’s market.
This model often functions as a cash grab, with the franchisors earning from selling licences and receiving fixed monthly fees, rather than supporting successful businesses.
How Has the Children’s Activity Sector Been Exploited?
The lack of regulation has allowed an explosion of children’s activity franchises selling unrealistic dreams to young mothers, despite the fact that these franchises are rarely profitable.
This sector is particularly vulnerable because:
- Start-up costs are low.
- The concept (play groups, music, movement, art classes) seems simple.
- Many buyers are young mothers looking for flexible work alongside their family duties.
- Stories of “mumpreneurs” overcoming adversity are used as role models.
The harsh reality:
- It is extremely difficult to attract enough paying customers.
- Local competition and free alternatives reduce demand.
- Most franchisees make minimal or negative income.
- Many franchisors know this but continue to aggressively sell franchises.
Many of the franchisors are slightly older women portraying themselves as inspirational role models who, despite adversity, built their successful businesses. They fail to mention that their success often came from selling franchises rather than running profitable classes.
What Is the Example of the Rapid-Growth Mental Wellbeing Franchise?
A mental wellbeing franchise claimed explosive growth, with 30 franchises sold within 30 minutes of launch, 50 within 24 hours, and 215 within three months. That is despite having zero staff according to Companies House records.
This bold and unrealistic growth story is a red flag to anyone experienced in franchising. Genuine franchise expansion requires:
- Careful analysis of territory potential
- Operational support
- Training teams
- Compliance controls
- Quality assurance
- System development
- Regional field managers
With no staff, meaningful support is impossible. Yet the founder was still invited to be a keynote speaker at the last IFA’s national exhibition, again showing how weak association vetting can be.
The tragic irony is that:
- Many franchisees will never earn meaningful income.
- The franchisor will claim they failed because they “did not follow the model.”
- Franchisees will probably face exit fees on top of their losses.
- Many will experience mental distress, while operating a mental wellbeing franchise!
How Do Minimum Monthly Fees Harm Franchisees?
Minimum monthly fees allow franchisors to extract income even when franchisees are losing money, and those fees are then used as leverage to demand exit payments from struggling franchisees.
Most franchise agreements include a clause requiring a minimum monthly payment, regardless of actual revenue. This creates a situation where:
- A franchisor profits even when franchisees fail.
- Franchisees cannot cut costs during lean periods.
- Falling into arrears gives the franchisor grounds for termination.
- Termination triggers large exit fees.
This payment structure incentivises franchisors to sell as many licences as possible, even if franchisees are not viable, because the franchisor earns predictable revenue.
How Do Multi-Brand Franchisors Contribute to the Problem?
Multi-brand franchisors can acquire successful founder-led brands when lacking the necessary franchising experience or qualifications, leading to mismanagement and collapse.
Because there is no regulation preventing unqualified individuals from acquiring multiple franchise networks, consolidation deal have happen without scrutiny. One UK multi-brand franchisor recently bought four previously profitable franchise brands, mismanaged them, and then collapsed into liquidation.
The consequences were severe:
- Franchisees were left without support.
- Brand reputations were destroyed.
- Contracts and fees became worthless.
- Investors lost their capital.
In a regulated environment, acquisitions of franchises would require proof of capability, background checks, and compliance reviews, none of which currently exist.
Can Other Multi-Brand Situations Also be Detrimental?
When other multi-brand franchisors have can acquired successful founder-led brands they have ruthlessly recovered their investment as quickly as possible, often at the expense of the franchisees. The original sense of mutual benefit is lost and overtaken by the franchisor’s drive for ever increasing corporate profit.
Why Is There Such a Power Imbalance Between Franchisors and Franchisees?
Franchise agreements and dispute mechanisms overwhelmingly favour franchisors, who use legal and financial power to enforce compliance even when they are in the wrong.
Franchisees typically:
- Have invested personal savings.
- Cannot afford to lose the franchise.
- Cannot risk expensive litigation.
- Are emotionally committed.
Franchisors, on the other hand:
- Have non-negotiable agreements that are heavily weighted to favour the franchisor
- Use specialist franchise lawyers to update agreements regularly to limit liability.
- Threaten legal action because they know franchisees cannot fight back.
- Hold the right to terminate, restrict, or penalise the franchisee.
Even when franchisors are clearly wrong, they invariably win disputes simply because the franchisee cannot afford the legal battle.
How Are Franchise Agreements Drafted to Favour Franchisors?
Agreements are written by specialist lawyers who continually update them to counter legal developments, such as the courts recognising an implied Duty of Good Faith.
Once courts began implying a Duty of Good Faith into franchise contracts, franchisors responded by:
- Inserting clauses that limit or define good faith narrowly.
- Requiring franchisees to waive certain rights.
- Drafting provisions that shift liability to franchisees.
This keeps the franchisor ahead of legal precedents and reinforces the power imbalance. Without regulation, agreements will continue to evolve in ways that weaken franchisee protection.
Why Is UK Franchising Desperately in Need of Regulation?
Because the current unregulated environment allows harmful business models, misleading marketing, unethical franchisors, and one-sided contracts to be used with impunity.
Regulation would not hinder genuine franchisors; it would protect them by removing the rogue players who damage the industry’s reputation. It would protect franchisees who often invest their life savings based on misrepresentation and withheld information.
What Regulatory Measures Would Fix the UK Franchising Sector?
- Ban Non-Territorial Licences Being Marketed as Franchises
This would prevent franchisors from selling unlimited licences and misrepresenting the business model as genuine franchising.
- Require a Mandatory Franchise Information Memorandum
That must include:
- A complete list of all franchises sold
- A list of all active franchisees
- Full disclosure of franchise closures
- Actual financial performance data rather than ‘illustrated earnings potential’.
- Details of directors and ownership
Transparency should be the mandatory cornerstone of ethical franchising.
- Ban Minimum Monthly Fees
Service fees should be based solely on a percentage of the franchisee’s turnover. This aligns the franchisor’s income with franchisee success and eliminates the perverse incentive to oversell unviable franchises to unsuitable prospective franchisees.
Conclusion: The UK Cannot Ignore This Any Longer
The UK franchising industry is at a critical crossroads. Without regulation, it will continue to attract opportunists, allow unethical franchisors to thrive, and lead more franchisees into financial and emotional hardship. The cases, scandals, and structural issues outlined above make it clear: voluntary associations, with conflicts of interest, are not enough, legal precedents are not enough, and consumer protections are not enough.
Meaningful regulation, targeted, simple, and enforceable, would protect franchisees, reward ethical franchisors, and restore integrity to an industry that is bursting with potential but plagued by abuse.
The UK franchising sector is crying out for regulation. It is time for government intervention to ensure that franchising becomes the safe, transparent, and sustainable business model it was always meant to be.
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