All questions

Franchise law

i Legislation

Barbados is one of approximately 30 countries across the globe and the only member of CARICOM that has franchise-specific legislation.

The Franchising Sector in Barbados is governed by the Franchises (Registration and Control) Act (Chapter 179A) (the Franchise Act). The Franchise Act was established to 'provide for the licensing, registration and control of businesses which operate on franchise in Barbados and for related matters'. The Barbados legislation has a primary focus on the protection of local business and ensuring that there is no unauthorised use of a franchisor's product, trademark or trade name.

The Franchise Act defines 'franchise' as 'a right granted in writing by the owner of a mark, product, service, technique or device to another person to use the mark, product, service, technique or device whether or not the mark, product, service, technique or device is protected by a trademark or trade secret, or by usage, or otherwise, and includes a licence to use a copyright, an industrial design or an invention'.

ii Pre-contractual disclosure

Barbados follows common law in respect of the tort of misrepresentation, which may be viewed as a false statement of fact addressed to the party misled and which induces the contract. Furthermore, the principle of memo dat quod non habet applies to the extent that one is not able to give what one does not own. Hence, prior to contract, the parties are legally protected during negotiations by basic common law principles.

iii Registration

Section 3 of the Franchise Act dictates that any franchise licence application must be in writing and addressed to the Minister of Finance.

Registration of a franchise licence is administered by the tax administration department of the Ministry of Finance and Economic Affairs. According to the regulations of the department, the application must be accompanied by the following: the completed application form (Form 1), a notarised copy of the franchise agreement, incorporation documents, projected profit and loss or income statements for each of the first two years of the proposed operation or, if the enterprise is already in operation, audited balance sheets and profit and loss statements for the past two years of the company's operation.

The application form is divided into four sections: applicant, investment, production and certification. The application must disclose relevant details such as the dates of registration of the company, names and contact information of the chairman, managing director, other directors and company secretary, nature of the business, details of any similar project within CARICOM, name and description of products for which the licence is sought for franchise, amount of capital to be invested in the proposed operation (i.e., land, building or leasehold improvements, machinery and equipment and networking capital), number and remuneration of persons expected to be employed in the proposed operation and the proposed address at which the business is to be conducted.

Pursuant to the provisions of the Franchise Act, upon receipt of the application for the franchise licence, the Minister publishes an official notice in the Official Gazette, The Barbados Advocate newspaper and the Nation newspaper inviting members of the public to object to the granting of such a licence, usually within 60 days.

If the franchise licence is approved, an initial registration fee of Bds$10,000 is required and there is an annual renewal fee of Bds$2,000.

iv Mandatory clauses

According to the Franchise Act, no person shall operate a business in Barbados using the mark, product, service, technique, device, copyright, industrial design or invention of another person unless a franchise from the owner is obtained; and no person, other than a citizen or permanent resident, shall operate a business in Barbados using his or her own mark, product, service, technique, device, copyright, industrial design or invention without a franchise licence. Hence, any person who wishes to operate a business in Barbados on franchise must obtain a licence from the Minister of Finance and Economic Affairs before commencing business.

Furthermore, foreign (i.e., non-Barbadian or non-CARICOM) businesses cannot use their own marks, products, services, techniques, devices, copyright, industrial designs or inventions without a franchise licence.

Only legally operating franchises may repatriate profits and capital.

v Guarantees and protection

The Consumer Protection Act (Chapter 326D) came into force on 16 January 2003. The purpose of this Act is to safeguard the rights of consumers in areas such as unfair trade practices, unfair contract terms and misleading and deceptive conduct.

The Consumer Guarantees Act (Chapter 326E) was established in an effort to provide redress for consumers in the event that they receive problematic goods or services. The Act relates to consumer guarantees in relation to the supply of goods and services and rights of redress against suppliers in respect of failure of goods and services to comply with any such guarantees.

Barbados's consumer protection and guarantees legislation is geared towards consumers, namely, persons who use goods and services for non-commercial use.

The normal practice relating to guarantees and protection is guided by basic contract law principles. Guarantees given by individuals and companies to the franchisor are enforceable. However, companies are not permitted to give guarantees in limited circumstances that are deemed as prejudicial to the company.