A cross-party parliamentary committee has called on the government to urgently close “unsustainable” regulatory gaps in the franchise sector, following a series of high-profile scandals involving major brands.
The business and trade committee’s report warns that the absence of a dedicated regulatory framework allows serious employment abuses to go unchecked and leaves franchisees exposed to unfair contracts. It concludes this situation is no longer sustainable.
To address this, the MPs have recommended the government consider introducing a statutory code of conduct for the sector, backed by stronger independent enforcement mechanisms.
Allegations of Imbalance and Abuse
The report highlights specific cases to illustrate the problems. It cites allegations from Vodafone franchisees of a significant power imbalance in their agreements, which prompted a high court claim in December 2024. Vodafone is contesting this claim.
It also references separate allegations of “widespread sexual harassment and abuse in McDonald’s restaurants”, raising concerns that franchisors can “fail to maintain adequate oversight of their franchisees’ employment practices”.
The committee’s findings follow a Guardian investigation which revealed claims that Adrian Howe, a former Vodafone employee who agreed to become a franchisee in 2018, drowned after becoming convinced his deal with the company would prove financially disastrous. Vodafone has previously said it did not push Howe into taking on poorly performing stores.
Broader Pressures on Small Firms
The wide-ranging small business strategy report identifies other key pressures beyond franchising. It notes that UK small businesses were owed £112bn in unpaid invoices by the end of 2024, and cites an average of 38 stores closing each day on Great Britain’s high streets.
It also references estimates by the British Retail Consortium that the autumn budget added £7bn to the cumulative cost of policy and regulation affecting retail.
To tackle these issues, the committee concluded business rates should be replaced with a system that “reflects a firm’s ability to pay”. It also said the late payment crisis could be ended by introducing “stronger, enforceable measures … including mandatory transparency to change behaviour across supply chains”.
Calls for a Coherent Plan
The committee chair, Liam Byrne, stated the evidence heard was stark, with many small businesses facing pressures comparable to the Covid pandemic but without emergency support. He listed late payments, rising energy costs, increasing crime, and a complex tax system as compounding barriers to growth.
“These pressures are not isolated; together they pose a real risk to business viability, high streets and economic growth,” he said, adding that “high streets do not die by accident.” He called for a more coherent and ambitious government plan for SMEs.
In response to the report’s findings on oversight, a spokesperson for McDonald’s said franchisees were held to account through newly strengthened review processes. They said the company reserves the right to terminate a relationship if a franchisee fails to meet standards, and that franchisees have a contractual obligation to comply with all laws and additional standards set by McDonald’s, as described by The Guardian.
