What Is the Brexit Impact on Business Franchises?

Brexit’s impact on businesses and franchises is already being felt by many. For others, the change is more nebulous.

Most business owners know many trading regulations with the EU have changed. But what, exactly?

Messages coming out of the UK government haven’t exactly been crystal clear. Despite having several years to set up new systems, most have not yet been put in place.

Here’s what we know so far about how businesses – especially franchises – will feel the impact of Brexit.

Brexit Tariffs and Trade

One of the biggest sticking points in the seemingly interminable Brexit negotiations was quota-free and tariff-free access to the EU’s huge market for UK businesses.

Before Brexit, free access was a guarantee. Now, that there is a Brexit deal – of a kind – we can see how franchisors and franchisees who import products or materials into the UK might be affected by Brexit tariffs.

• Goods with specific tariffs – you can check the gov.uk website to view the whole list of goods which have specific tariffs thanks to Brexit.
• Tariffs for part-EU or part-UK goods – in the cases where 40% or more of the final value of a given product is from EU or British origin, the tariff will be determined by the Brexit law. 

If you are a business owner or franchisee trading with suppliers or distributors in the EU (or if your franchisor is in the EU), it is possible to transfer the costs of tariffs to the other party by putting them on what is known as “ex-works collection terms”.

The downside of this is that the other party is unlikely to accept it unless they are very much the junior in the relationship.

A better long-term solution for some UK businesses or franchises might be to set up a new company or local office in the EU. If your problem is with distribution, then you can also use a third-party logistics company.

Brexit Employment Law

For many employers, Brexit immigration policy changes mean that the way they hire staff has changed.

Just as before Brexit, the UK is free to set its own rules when it comes to employment law. Some ways of doing things in the EU relating to immigration and employment – most of which the UK had a hand in as a senior EU member – are now standard in the UK too.

As far as Brexit immigration consequences are concerned, the Right to Free Movement ended when UK EU membership did. There are two things to be aware of:

1. The EU Settlement Scheme – means EU nationals must register to preserve their rights to work, healthcare, and others under UK law.
2. A work in progress – the UK government has stated that it will adopt a “points-based” immigration system. As of February 2021 – over a month after Brexit – the gov.uk website still reads “This page will be updated with the latest information about the new points-based immigration system as it becomes available.”

The major concern for franchise and business owners currently is to ensure that all of their team members from the EU have registered themselves correctly. It would also be a sensible step to offer advice and support to employees who are understandably confused by their new status.

All in all, much of the UK’s post-Brexit immigration system is not yet in existence.

Brexit Professional Qualifications

It’s important to bear in mind that professional qualifications no longer receive automatic recognition after Brexit.

Doctors and nurses, engineers and architects, dentists and pharmacists and many others will now need to apply to have their professional qualifications recognised in the UK or the EU.

Brexit Travel for Paid Work

Pre-Brexit, UK residents could move to any country in the EU and live and work there, and vice versa.

Now, if you or any of your team need to travel into the EU for work purposes – or you are working with professionals from the EU in the UK – you need to apply to do so. The new reciprocal agreements which are in place state that:

• Managers or specialists can stay for up to three years
• Trainees and other employees can stay for up to one year
• If you are on short-term business, you will need a work permit (this permit will allow you to stay for up to 90 days over one year)

Brexit Brand Protection

EU trademarks no longer have any power in the UK. The UK government has created new UK trademarks which are identical to the EU versions and applied them. This does not apply to pending applications.

Be aware that if your EU trademarks will become UK trademarks, it may leave your EU trademarks out of use and at risk of being attacked. This is an important consideration for business owners or franchises to remember in future.

Brexit Competition Law

The UK government has also essentially copy-and-pasted EU competition laws. The so-called “Competition SI” adopts EU competition regulations as part of UK law.

This is important for franchise owners, as the all-important “vertical agreement block exemption” is important for permitting franchisees and franchisors to function in the accepted way.

Of course, this is by no means all of Brexit’s business impact. For franchisees and franchisors in the UK and across Europe, the true effects of Brexit will be felt for many years to come.

Looking for a franchise opportunity that’s safely within the UK?

Fantastic Services might operate successfully on several continents. But our UK franchisees have continued to thrive throughout the pandemic and through Brexit too.

• Last update: April 9, 2021

Posted in Industry Insights