The UK government needs to eradicate “unsustainable” gaps in the policing of franchise businesses after a series of scandals to hit the sector, a parliamentary committee has found.
The conclusion forms part of the business and trade committee’s small business strategy report and follows a Guardian investigation in December which revealed claims that Adrian Howe, a former Vodafone employee who had agreed to become a franchisee in 2018, drowned after becoming convinced his deal with the multinational company would prove financially disastrous.
The cross-party committee highlighted further allegations from Vodafone franchisees of an imbalance of power in their agreements, which prompted them to launch a high court claim in December 2024. Vodafone is contesting the claim.
The MPs also raised separate allegations of “widespread sexual harassment and abuse in McDonald’s restaurants” and how franchisors could “fail to maintain adequate oversight of their franchisees’ employment practices”.
“Gaps in the oversight of franchise agreements allow serious employment abuses to go unaddressed and leave franchisees exposed to unfair contractual practices,” the committee concluded.
“The absence of a dedicated regulatory framework or clear accountability for employment standards within franchise networks is no longer sustainable.”
The committee added to calls for new legislation in the sector by recommending that the government consider the “introduction of a statutory code of conduct, alongside stronger independent enforcement mechanisms”.
The wide-ranging report also identified “key pressures” on small businesses including “an average of 38 stores closed each day on Great Britain’s high streets”; evidence that UK small businesses were owed £112bn in unpaid invoices by the end of 2024; and estimates by the British Retail Consortium that the autumn budget added £7bn to the cumulative cost of policy and regulation affecting retail.
The committee concluded that business rates should be replaced with a fairer system that “reflects a firm’s ability to pay”, while the late payment crisis could be ended by introducing “stronger, enforceable measures … including mandatory transparency to change behaviour across supply chains”.
The committee chair, Liam Byrne, said: “The evidence we heard during this inquiry was stark. Many small businesses are now operating under pressures comparable to those experienced during the Covid pandemic but this time without an emergency support framework in place.
“SMEs [small and medium-sized enterprises] are facing late payments, rising energy costs, increasing crime, a complex tax system and barriers to growth that are compounding rather than easing.
“These pressures are not isolated; together they pose a real risk to business viability, high streets and economic growth.
“High streets do not die by accident. If the government is serious about growth, it must set out a more coherent and ambitious plan for the businesses that make up so much of the UK economy.”
A spokesperson for McDonald’s said franchisees were held to account on a regular basis through newly strengthened review processes.
They said the company “reserves the right to take appropriate action, including the termination of a relationship, if a franchisee fails to deliver on our standards and expectations”.
They added: “Franchisees have a contractual obligation to comply with all applicable laws and regulations and comply with all additional standards set by McDonald’s.”
Vodafone has previously said that it did not push Howe into agreeing to take on any poorly performing stores.
