Energy Efficiency Scheme - McDonald's Clause captures franchise operations!

Franchises will be caught by the CRC Energy Efficiency Scheme (“CRC”), a new UK-wide mandatory emissions trading scheme, which is likely to apply primarily to organisations with annual electricity bills of approximately £500,000 and over.

Under the so-called “McDonalds Clause”, franchise operations will be counted together as operating under a single “carbon footprint”. This means that franchisors will be responsible for the energy consumption of their franchisees based in the UK, and consequently, will be liable for any breach of the CRC. Even if the franchisor is based outside of the UK, where there are franchisees based in the UK falling within the scope of the CRC, the CRC will apply.

Franchisors are required to produce annual reports detailing the carbon dioxide emissions (CO2) associated with the franchise’s energy use. Failure to submit such a report will incur a fine of £5,000.

In a bid to improve energy efficiency and reduce their “carbon footprint”, franchisors will have to buy allowances based on how much CO2 they think they will emit each year. At the end each year, they must surrender enough allowances to cover the amount they and their franchisees have emitted.

It is vital that franchisors check whether they qualify for the CRC and comply with the rules on time and as required to avoid criminal prosecution or a civil penalty.

For further information on this scheme, the regulation of other Environmental or Renewable Energy Schemes, or Franchising please contact Michelle Craven or Shelley Marshall.