By Andy Stanney, Senior HR Consultant, Nectar HR

In the world of franchising, brand consistency, operational control, and strategic growth are top of mind. But when ownership or control of a franchise location changes hands – say from one franchisee to another – one critical and often misunderstood legal area demands attention: TUPE, the Transfer of Undertakings (Protection of Employment) Regulations.

Whether you’re a seasoned franchisor, an incoming franchisee, or preparing to exit, understanding TUPE is not optional, it is essential.

What Is TUPE?

At its core, TUPE protects employees when the business they work for changes ownership. It ensures that employment contracts, rights, and obligations transfer seamlessly to the new employer. Think of it as an employment safety net during business transitions.

In a franchise setting, TUPE often applies when:

• One franchisee sells or transfers their business to another.
• A franchisor takes over a failing location.
• Services are “re-tendered” (e.g., cleaning, catering, etc.) under the franchise model.

Does TUPE Apply to Franchise Transfers?

This is where things get nuanced. While TUPE does not automatically apply to the grant of a new franchise agreement, it can apply if there is a transfer of an “economic entity” that retains its identity, i.e., if a new franchisee steps into an existing operation with continuity of staff, operations, and customers.

Case-by-case analysis is critical, but common signs TUPE will apply include:

• Staff remaining in place across the transition.
• Similar business operations post-transfer.
• Assets or stock being transferred.
• The location and customer base staying largely unchanged.

What Are the Risks of Ignoring TUPE?

Failure to follow TUPE correctly can expose franchisors and franchisees to serious liabilities:

• Automatic unfair dismissal claims
• Claims for failure to consult employees or their representatives (up to 13 weeks’ pay per employee)
• Disputes over which party is responsible for liabilities

Even a well-intentioned buyer can inherit legal headaches if TUPE obligations are overlooked.

Practical Advice: TUPE in Action

Here’s how franchisors and franchisees can navigate TUPE safely:

1. Start Early: Due Diligence Is Key

Before any transfer, assess whether TUPE is likely to apply. Review employee contracts, policies, and any existing disputes. Involve legal advisors early.

2. Communicate Clearly and Legally

Both old and new employers must inform and, where appropriate, consult employees or their representatives well in advance. Franchisors should provide guidance and coordination where necessary.

3. Manage Employee Expectations

Franchisees taking over a site should be prepared to honor the terms of transferred staff—including length of service, pay, holidays, and disciplinary records.

4. Draft Franchise Agreements with TUPE in Mind

Franchisors should include clauses that clarify each party’s responsibilities under TUPE to avoid costly finger-pointing later.

5. Consider Protective Measures

Sometimes, indemnities can be negotiated between outgoing and incoming franchisees to cover potential TUPE liabilities. These are especially useful where risk is uncertain or disputed.

Final Thought: TUPE Isn’t a Dealbreaker—It’s a Deal Shaper

TUPE can seem complex, but with the right preparation, it doesn’t need to be a stumbling block. In fact, understanding TUPE helps all parties maintain continuity, avoid disputes, and protect the brand’s reputation—key ingredients in any successful franchise relationship.

Expert Tip: Always treat TUPE as a collaborative process. Early communication and legal clarity are your best tools for avoiding post-transfer turbulence.