Operating a franchise in Ireland

Franchising in Ireland is increasingly popular year on year with turnover close to €2.5 billion. There are currently over 150 franchise systems and more than 4,000 active franchises units operating across the country.

With this in mind, it is critical for the those already operating a successful business as well as those looking to expand into franchising to understand exactly how the system works and the legal obligations that must be abided by.

Read more on international franchising

• Operating a franchise in the UK
• Operating a franchise in France
• Operating a franchise in Germany
• Operating a franchise in Luxembourg
• Operating a franchise in Spain
• Operating a franchise in the Netherlands
• Operating a franchise in South Africa
• Operating a franchise in China
• Operating a franchise in Singapore
• Operating a franchise in Australia
• Operating a franchise in the UAE
• Operating a franchise in Saudi Arabia
• Operating a franchise in Qatar

A total of 44% of franchise systems operating in Ireland are of Irish origin, highlighting that franchising is a popular growth method for those looking to expand an already successful business, with many then looking to expand outside Ireland. With this expansion has come more job creation, with figures increasing each year since 2006. 

Over half of franchises are in the service sector and one third in the retail sector, and a significant minority of franchise opportunities are van-based. The food and drink industry is the most popular business sector, covering over one fifth of franchise owners.

Legal considerations 

Ireland does not have specific franchising legislation. Instead, franchise agreements are governed by general contract, competition, agency, consumer protection and intellectual property laws. As Ireland is a member of the EU, both domestic and EU laws apply. 

The Competition Act 2002 (as amended) and EU competition regulations apply, particularly regarding restrictive practices. Franchise agreements in Ireland must comply with the 2002 act, particularly section 4, which prohibits anti-competitive agreements. These provisions mirror Article 101 of the Treaty on the Functioning of the European Union (TFEU) ensuring that franchise agreements do not restrict competition.

As such, both Irish and EU competition laws apply, especially where agreements may affect trade between EU member states. Of particular note is the European Commission’s 2022 Vertical Block Exemption Regulation (VBER) which exempts certain vertical agreements – for instance, between suppliers and distributors – from antitrust rules under Article 101(1) TFEU, provided they meet specific conditions. Under the VBERs, there is a specific section pertaining to “franchising” and the applicability of the VBERs to such agreements. 

If an arrangement is a true franchise, agency considerations do not typically arise. However, in the event that a franchise agreement is, in reality, an agency agreement, the European Communities (Commercial Agents) Regulations 1994 and 1997 will apply. 

Franchisors and franchisees should also be aware of Irish consumer protection legislation, including the Sale of Goods and Supply of Services Act 1980, Consumer Protection Act 2007, and Consumer Protection Act 2014. The Consumer Protection Acts prohibit pyramid schemes: that is, schemes by which a person gives consideration for an opportunity to receive compensation derived primarily from the introduction of other persons into the scheme, rather than from the supply or consumption of a product. Establishing, operating, promoting or knowingly taking part in a pyramid scheme can lead to fines, imprisonment, or both. 

IFA compliance 

The Irish Franchise Association (IFA) is a voluntary body that self-regulates its members. The IFA provides guidance and promotes best practice in the industry. 

Members must follow the IFA Code of Ethical Conduct, which is based on the European Franchise Federation’s Code of Ethics for Franchising (the code). The code sets out certain requirements including minimum terms that should be incorporated into members’ franchise agreements. Failure to adhere to the code may result in membership being revoked. 

The IFA also offers networking opportunities and resources for franchisors and franchisees. 

Structure and start-up

A franchisor can operate as a limited company, partnership or sole trader, but a private limited company is the most common due to liability protection for the underlying shareholders. 

There is no legal requirement for a franchisor to be a local entity or wholly owned by Irish nationals. Foreign franchisors can enter the Irish market without establishing a subsidiary or branch office. However, practical considerations such as tax and operational efficiency may influence the choice of structure and appropriate advice should be sought in this respect. There may also be regulatory approvals or licences that need to be sought in advance of establishing a franchise, and these should be taken into consideration before finalising the corporate structure. 

There is no statutory limit on a franchise agreement’s duration, but typical terms range from five to 10 years, with renewal options. Renewal conditions may include performance criteria, training, or additional fees. Some agreements provide for automatic renewal, while others require renegotiation. Long-term agreements may be subject to competition law scrutiny if they impose excessive restrictions. Franchise agreements do not need to be registered with any local authority in Ireland. 

The code sets out certain formalities, including that franchise agreements are written in or translated into the official language of the country where the franchisee is established. 

The code also provides for franchisees to be provided with full and accurate disclosure of information material to the franchise relationship within a reasonable time prior to execution. 

Whilst the code is not legally binding, disclosures are best practice and failure to do so may lead to disputes or claims of misrepresentation. 

Non-compliance and non-compete clauses 

Non-compliance obligations relating to the goods or services purchased by the franchisee are considered acceptable where they are necessary to maintain the common identity and reputation of the franchise network.  

Non-compliance clauses are generally enforceable during the franchise term, provided they:

• are reasonable in scope – limited to what is necessary to protect the franchisor’s legitimate interests;
• are within a specified duration – a five year term will be permissible under the VBERs where the parties’ market shares are below 30%; and
• cover a geographic area.

Post-term non-compete restrictions must be carefully drafted to avoid being deemed excessive or anti-competitive. The VBERs specify that a post-term non-compete clause is acceptable if it is limited to the territory where the franchisee operated during the agreement, essential to protect the franchisor’s substantive know-how, and is limited to a duration that does not exceed one year after the termination of the agreement. Post-term non-compete clauses that do not fulfil these criteria are excluded from the ‘safe harbour’ of the VBERs and may be subject to competition law scrutiny.

Resale and price fixing rules

Franchisors cannot impose fixed minimum resale prices on franchisees, as this would constitute an indirect form of resale price maintenance (RPM) – restricted under EU competition law. However, they may provide recommended retail prices (RRP) or set maximum prices provided the recommendation given is genuinely non-binding, is not accompanied by pressure, coercion or incentives placed on the franchisee to implement such recommendations, and it is made clear that, at all times, the franchisee remains free to independently set its own pricing. The parties’ market shares should also be below 30%. 

Care should be taken to ensure that any recommendation given does not indirectly act as a fixed or minimum resale price. Therefore, regarding the setting of a maximum resale price, the franchisor should make clear that the franchisee has the ability to discount or price below the maximum price given. Franchise agreements should be structured to allow franchisees pricing flexibility while maintaining brand consistency. 

Intellectual property 

Trade marks can be registered, nationally, with the Intellectual Property Office of Ireland. This provides exclusive rights to use the brand in the Republic of Ireland. An EU trade mark registration covers all member states, including Ireland, thereby providing broader coverage. Neither an Irish nor EU trade mark registration covers Great Britain or Northern Ireland. International trade mark protection that extends to Ireland can also be obtained. However, a trade mark registration is not obligatory.

A franchisor can acquire unregistered rights when it uses its trade mark over a long period of time in Ireland. However, should a franchisor wish to enforce its unregistered right against unauthorised use, it would have to rely on the common law right of passing off, which can be expensive. Accordingly, having a trade mark registration is crucial for franchisors to ensure effective enforceability should they need to take action to protect their brand against unauthorised use.

If infringement arises in Ireland, enforcement of registered and unregistered trade mark rights can be pursued through civil litigation.

Trade secrets, know-how, design rights and patents are all protected under Irish law. Confidentiality obligations and restrictive covenants in franchise agreements help safeguard proprietary information. The law of copyright also provides protection for materials such as manuals, software, marketing materials and databases.

Franchise agreements will usually contain provisions which state that all goodwill in respect of brand will become the exclusive property of the franchisor and that the franchisee will not acquire any rights in respect of that goodwill. Should such provisions not be included, there is a risk that a franchisee might claim that the goodwill arising from the sale of branded products in the franchisee’s territory accrues to it and not the franchisor.

Strong intellectual property protection enhances brand recognition, increases franchise value, and prevents unauthorised use.