The UK government needs to plug “unsustainable” gaps in the policing of franchise businesses after a series of scandals hit the sector, a parliamentary committee has found.
The conclusion forms part of the Business and Commerce Committee’s Small Business Strategy Report and follows A Guardian investigation in December It revealed that ex-Vodafone employee Adrian Howe, who agreed to become a franchisee in 2018, sank after his deal with the multinational proved financially disastrous.
The cross-party committee highlighted further allegations from Vodafone franchisees over the imbalance of power in their contracts, which prompted them to launch High Court suit in December 2024. Vodafone is contesting this claim.
The MPs also raised separate allegations of “widespread sexual harassment and abuse in McDonald’s restaurants” and that franchisors “fail to maintain adequate oversight of the employment practices of their franchisees”.
“Gaps in the oversight of franchise agreements allow serious employment abuses to go unaddressed and expose franchisees to unfair contractual practices,” the committee concluded.
“The lack of a dedicated regulatory framework or clear accountability for employment standards in franchise networks is no longer sustainable.”
Committee added He called for a new law in the field By recommending that the government consider “introducing a statutory code of conduct along with strong independent enforcement mechanisms”.
The wide-ranging report identified “significant pressures” on small businesses, including “an average of 38 shops closing on Great Britain’s high streets every day”; Evidence that UK small businesses will owe £112bn in unpaid invoices by the end of 2024; And the British Retail Consortium estimates the Autumn Budget added £7bn to the cumulative cost of policy and regulation impacting retail.
The committee concluded that business rates should be replaced by a fairer system that “reflects a firm’s ability to pay”, but the late payment crisis could be ended by introducing “strong, enforceable measures … including mandatory transparency to change behavior in supply chains”.
Committee Chair, Liam Byrne, said: “The evidence we heard at this inquiry is overwhelming. Many small businesses are now operating under pressures comparable to those experienced during the Covid pandemic, but this time without an emergency support framework.
“SMEs [small and medium-sized enterprises] Late payments, rising energy costs, rising crime, a complex tax system and barriers to growth are compounding rather than easing.
“These pressures are not isolated; together they pose a real risk to business viability, high streets and economic growth.
“The high street will not die by accident. If the government is serious about growth, it needs to create a more coherent and ambitious plan for the businesses that make up most of the UK economy.”
A McDonald’s spokeswoman said franchisees would be held to account on a regular basis through newly strengthened review processes.
“If a franchisee fails to deliver on our standards and expectations, the company reserves the right to take appropriate action, including termination of the relationship,” they said.
They added: “Franchisees have a contractual obligation to comply with all applicable laws and regulations and to comply with all additional standards set by McDonald’s.”
Vodafone has previously said that Howe has not agreed to take over any underperforming stores.
