How retail franchises empower the entrepreneurial journey

Your everyday entrepreneur is closer than you think

Retail and wholesale businesses come in multiple varieties, from integrated models, franchises, cooperatives, independent retailers as well as small family businesses. Such diversity enables retail and wholesale to adapt and offer their customers choice and better prices in every community.  

In shopping streets, you are likely to find many entrepreneurs behind the familiar brand name that hangs above the door. These shop owners offer local jobs, help students fund their studies by offering work outside of school hours, sell what meets your local needs and preferences, working with local, national or international suppliers. They pay local taxes and contribute to the community e.g., by sponsoring local events.  

Franchise variety 

Franchise systems give opportunities to independent entrepreneurs and sometimes former employees to develop their business under an established brand, benefitting from shared know how, scale, training, technological assistance and support, assistance during crisis and help with navigating legal compliance. This is in exchange for royalties governed by a franchise agreement. 

Franchises can appear in different forms. Franchisors can be large, managing numerous outlets, or smaller working with a few franchisees. Most franchisees are SMEs though some may be bigger and active in various countries.  

Franchise agreements usually cover the same topics, but there can be differences in the independence of franchisees, both entrepreneurial and financial, depending on the nature of the franchise, the needs of franchisees and the level of involvement they wish to have. Franchisees can be bound to buy only from the franchisor, referenced suppliers or a central purchasing body (known as exclusive supply clauses) to benefit from the network and maintain uniformity across stores. Alternatively, the contractual obligation may be only for a set percentage.  

The European Court of Justice in the Pronuptia ruling, confirmed by the EU 2022 Guidelines on Vertical Restraints, permits exclusive supply clause where it is strictly necessary to ensure the know-how and assistance provided by the franchisor do not benefit competitors or to maintain the identity and reputation of the network. 

Legal obligations 

Franchisees are free to develop their business, within contractual and legal constraints. In this way, franchisors guide but do not control their franchisees. This allows franchisees to respond to local market needs, respond quickly to new trends. With the ongoing support they get from the franchisor, franchisees are better prepared to invest in their digital and sustainability transitions.  

As independent entrepreneurs, franchisees ensure compliance with local laws and regulations. This means a franchisee operates a business at their own business risk and the employees of a franchisee have an employment contract with the franchisee, not with the franchisor. 

Franchising contributes to quality jobs 

Employment relationships and opportunities are shaped by leadership, company culture, organisational vision, and available resources rather than by company size. Those working within an SME are able to speak to directly to a manager, allowing for a faster response, and possibly more understanding of personal situations requiring last-minute changes to shifts.  

Retail and wholesale employees wearing the same brand uniform may be engaged under different terms and working conditions. Such differences may result from the independent operational and employment decisions of individual franchisees but in all cases must comply with all applicable national and local laws.  

Working conditions in Europe are governed by minimum standards set by EU directives, binding rules in EU regulations, national labour laws, and collective agreements and may also be influenced by company policies, sector-specific rules, court rulings and international labour standards.  

Collective agreements take different forms – national, sectoral, or company level – and their effect and enforceability vary across Member States. They are part of the labour law framework and, in principle, operate independently of any specific business model. The same applies to EU requirements on the transfer of undertakings, which set a minimum framework to protect employees during that transition independent of the business model. 

The influence of social partners on employment conditions across different business models mainly depends on how strong and well-structured the national social dialogue system is, though government rules, market conditions, and company policies also matter.   

It is an asset of the EU that it can offer one of the highest standards of worker protection through its existing framework irrespective of the business model concerned. As the European social partner for the Commerce sector, EuroCommerce is committed to promoting responsible employment practices.