Fiona Boswell

Partner, Head of Franchising and Commercial Services


Is the Brexit Effect squeezing your margins?

Fiona Boswell

It's official - we are on the way out of the EU March 2019 and already hospitality businesses are feeling the pinch on ingredient and product prices. How can your contracts help you manage these fluctuations?

1. Include a Brexit Effects Clause
Price fluctuations and variations have always been covered in well drafted contracts that deal with changes to raw material costs. The issue is usually whether you have the right to (i) pass this on; or (ii) terminate the contract if it simply becomes unprofitable. Make sure that contracts you are entering into now contain a Brexit Effect Clause that clarifies the options available to you if this happens.

2. Shorten contract terms
Consider carefully all long term contracts that continue beyond the next 2 Pre-Brexit years. There are many laws impacting on businesses that stem from EU legislation. For example - most of our employment law, environmental laws, aspects of our consumer laws - intellectual property laws that may fall away or be revised when we leave the EU. Having the opportunity to revisit the contract terms at that point and consider the revised legal position of the parties could be key.

3. Secure national protection for key business assets
Many business key assets may be protected in the EU and not in the UK. Trademarks, and other intellectual property assets are often protected this way. Post Brexit EU TMs may no longer have effect in the U.K. To preserve your monopoly rights, get national protection now.

4. Secure EU protection for your national brands
If you trade across the EU post Brexit your EUTM may no longer give you protection in countries that are part of the EU. Accordingly, to preserve your monopoly rights in your brand across Europe you should consider individual registration.

5. Back to back your contracts
Ensure that you are able to pass on or recover any detriment you suffer in a supply chain to the customer or from your supplier. As with all contracts it's very much a question of who takes the risk. If possible, ensure that it isn't you by building in appropriate indemnities into your contracts.

Word to the wise
Managing Brexit for any business is going to be a tricky process. Having a robust approach to contracts that you are entering into now will help you to control your exposure.

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