Table of Contents
Comments
Commenters1
Government intends to impose obligations on both parties to a particular type of business arrangement where one person is trading under the corporate image and direction of another person, often known as vertical distribution agreements. In these instances, the parties to the contract do not belong to the same group structure and are only linked by a particular type of business contract. Government intends to consider parties to these agreements as one entity, and assign responsibility for emissions to one party of the agreement.
The rationale underpinning this decision is mainly related to the nature of these agreements, where the parties generally share a common trading image and where one party to the agreement (a superior party) has the potential to influence the way in which energy is used by the counterparty to that agreement. Placing responsibility with the superior party to the agreement maximises leverage of reputational and corporate social responsibility drivers, given that the public recognises the brand and will often not be aware of business arrangements such as franchising agreements. This approach is in line with the overall aim of CRC – to drive improvements in energy efficiency and deliver cost-effective carbon savings.
Government intends to impose obligations on both parties to a particular type of business arrangement where one person is trading under the corporate image and direction of another person, often known as vertical distribution agreements. In these instances, the parties to the contract do not belong to the same group structure and are only linked by a particular type of business contract. Government intends to consider parties to these agreements as one entity, and assign responsibility for emissions to one party of the agreement.The rationale underpinning this decision is mainly related to the nature of these agreements, where the parties generally share a common trading image and where one party to the agreement (a superior party) has the potential to influence the way in which energy is used by the counterparty to that agreement. Placing responsibility with the superior party to the agreement maximises leverage of reputational and corporate social responsibility drivers, given that the public recognises the brand and will often not be aware of business arrangements such as franchising agreements. This approach is in line with the overall aim of CRC – to drive improvements in energy efficiency and deliver cost-effective carbon savings.
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The Government Response to the CRC policy design consultation committed to ensure that large non-energy intensive franchise-based organisations participate in CRC, with franchisors taking responsibility for the emissions of their franchisees.
The Government Response to the CRC policy design consultation committed to ensure that large non-energy intensive franchise-based organisations participate in CRC, with franchisors taking responsibility for the emissions of their franchisees.3
The rationale for including franchising agreements within CRC applies to a variety of business models in use in the UK business sector. These models include franchising, those often known as vertical distribution agreements and models such as distribution or licence agreements, where the parties exercise their business at different levels of the distribution chain.
The rationale for including franchising agreements within CRC applies to a variety of business models in use in the UK business sector. These models include franchising, those often known as vertical distribution agreements and models such as distribution or licence agreements, where the parties exercise their business at different levels of the distribution chain.4
Government considers that these agreements commonly include some degree of influence on the way in which the ‘franchisee’ carries out activities at its premises. This level of influence can indirectly impact the way in which energy is used. Government accepts that influence would be indirect in the majority of instances. In many types of vertical distribution agreement, the ‘franchisor’ requires ‘the franchisee’ to equip and present the premises where it exercises its business according to a pre-defined business format. Government considers that this element can be used as a proxy to indicate a degree of influence on energy management choices.
Government considers that these agreements commonly include some degree of influence on the way in which the ‘franchisee’ carries out activities at its premises. This level of influence can indirectly impact the way in which energy is used. Government accepts that influence would be indirect in the majority of instances. In many types of vertical distribution agreement, the ‘franchisor’ requires ‘the franchisee’ to equip and present the premises where it exercises its business according to a pre-defined business format. Government considers that this element can be used as a proxy to indicate a degree of influence on energy management choices.5
As a communication shorthand, Government proposes to label these agreements as ‘franchising’. However, within the Order (see Paragraph 6 of Schedule 3), we have sought to establish a definition that would capture franchising and other types of similar vertical distribution agreements.
As a communication shorthand, Government proposes to label these agreements as ‘franchising’. However, within the Order (see Paragraph 6 of Schedule 3), we have sought to establish a definition that would capture franchising and other types of similar vertical distribution agreements.6
Government has been in dialogue with a number of organisations in the fast food, retail, telecommunications, automotive, mail delivery, and oil and gas sectors, as well as trade associations, which has informed the proposed approach, set out below.
Government has been in dialogue with a number of organisations in the fast food, retail, telecommunications, automotive, mail delivery, and oil and gas sectors, as well as trade associations, which has informed the proposed approach, set out below.7
In relation to qualification, this approach would entail that the half hourly metered electricity consumption from all of the franchisee operations would need to be aggregated with that of ‘the franchisor’ (the brand organisation). If the total half hourly electricity collectively met or exceeded the 6,000MWh inclusion threshold over the course of the qualification year, the franchisor organisation would qualify for CRC. The ‘franchisor’ would then participate in CRC including any energy use incurred at franchisee premises within its CRC energy use portfolio.
In relation to qualification, this approach would entail that the half hourly metered electricity consumption from all of the franchisee operations would need to be aggregated with that of ‘the franchisor’ (the brand organisation). If the total half hourly electricity collectively met or exceeded the 6,000MWh inclusion threshold over the course of the qualification year, the franchisor organisation would qualify for CRC. The ‘franchisor’ would then participate in CRC including any energy use incurred at franchisee premises within its CRC energy use portfolio.8
Definition of franchise agreements
The CRC Draft Order introduces a definition of franchise in Schedule 3 that is essentially based on the following key elements.
Definition of franchise agreementsThe CRC Draft Order introduces a definition of franchise in Schedule 3 that is essentially based on the following key elements.
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• The existence of an agreement between parties operating at different levels of the distribution chain and where, as a result of that agreement:
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• ‘The franchisee’ conducts its business by either selling or distributing goods, or providing services, in accordance with the agreement; and
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• ‘The franchisee’ equips or presents its premises as instructed by “the franchisor”, so that all the premises connected to “the franchisor” have a uniform internal appearance, which the public would identify with ‘the franchisor’.
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If no, please explain your reasoning and suggest a workable alternative approach which could achieve these objectives
Tags: energy, energy efficiency, energy management choices, energy use, food, hourly electricity, hourly metered electricity consumption, large non-energy, oil and gas sectors, Overview Government, retail, telecommunications, United Kingdom