Nothing says "spring has sprung" quite like a chocolate egg the size of a rugby ball with your own face printed on the box. Ellie and Liam certainly thought so. In a paid Instagram ad for Cadbury's Gifts Direct, they held up their personalised Easter eggs and told each other it was the "Best Easter ever". Bite Back, the campaign group which treats sugar the way Van Helsing treated vampires, was less impressed. It complained to the Advertising Standards Authority that the ad was a paid online ad for an identifiable less healthy food product, and therefore in breach of the new rules on LHF advertising.
Despite the branding, the advertiser in this case was not Cadbury's or Mondelez, the owner of the Cadbury's trade mark, but a company called Hemingways Markting Services Limited, who provide confectionery gifts and rewards alongside pre-paid products such as gift cards and e-vouchers. Among other things, it trades as Cadbury's Gifts Direct. Hemingways asserted that they are a small or medium enterprise (SME) and therefore exempt from rule 15.19.
Their argument had a lot going for it. The eggs were plainly Cadbury eggs, in "HALF & HALF" and "INCLUSIONS" varieties. One of them had even been helpfully bitten into to show the crunchy bits inside. Since 5 January 2026, CAP Code rule 15.19 has said that you must not pay to place an identifiable less healthy food or drink product on the internet. The ASA agreed that consumers would know exactly what was being advertised. So far, so upheld. Except it wasn't.
This is the second useful decision on the SME exemption since the Patisserie Valerie case. It is arguably the more interesting of the two, because it tackles the question of when a brand licence becomes a franchise.
This matters because the LHF restrictions don't apply where the person paying for the ad is a food or drink SME, meaning an enterprise employing fewer than 250 people, but the head count includes people employed "as part of a franchise agreement". The head count is taken on the first day of the advertiser's financial year in which the ad is paid for. Hemingways had 122 permanent staff and 16 temporary staff. Across the whole group, overseas companies included, it had 160. That is comfortably under 250, as long as you don't add in Mondelez, who it is safe to assume employ a lot more than 250 people.
Everything therefore turned on whether Hemingways was a licensee or a franchisee. Regulation 4 of the Advertising (Less Healthy Food Definitions and Exemptions) Regulations 2024 defines a franchise agreement as one where the franchisee sells or distributes food or drink, and the franchisor agrees the food or drink offered, the internal and external appearance of the premises, and the business model, all in a form similar to its other comparable arrangements.
Hemingways produced its trade mark license which granted rights in trade marks and website URLs to Hemingways, but but did not hand Mondelez ongoing control of the business. Hemingways bought stock from Mondelez and sold it online, but kept control of its own marketing, sales and stock decisions. Its premises were warehouses with no customer-facing presence and no Cadbury branding outside. The clauses on approved facilities and quality standards were about food safety, not interior design. Tellingly, the last site audit took place in 2006, the same year Cadbury launched the ad with the gorilla drumming along to Phil Collins. This demonstrated the hands-off things nature of the commercial relationship.
Then there was the website, which might count as a digital "shop window". Hemingways said it chose the photography, the imagery and the layout, and that Mondelez's input was limited to logo use and colour specifications, with no routine sign-off. It built its own operating model, fulfilment, customer service and commercial strategy. On the final limb of the test, whether Mondelez had comparable arrangements with others, Hemingways said, quite reasonably, that only Mondelez could answer. Crucially, Hemingways created, placed and paid for the ad without any input from Mondelez.
The ASA was persuaded, "on balance", that Hemingways was a licensee, rather than a franchisee. It noted that the relationship went back decades and that the licence dated from the early 2000s, long before anyone had heard of less healthy food rules. As Hemingways was not a franchisee, Mondelez's staff did not count towards the total head count, so Hemingways was an SME, and the ad fell outside rule 15.19. The complaint was therefore not upheld and no further action was required.
So what is the difference between a licensee and a franchisee? A licensee gets to use the badge. A franchisee gets the badge plus the menu, the shopfitting, and the operations manual. The ASA has confirmed that brand guidelines and quality clauses alone do not turn the first into the second.
Before every brand owner rushes to recut its distribution agreements, note what actually won this investigation. It was evidence: payroll reports, a group chart, the licence itself, a recharge invoice for an overseas company with no staff of its own, and Meta invoices with a redacted bank statement. The ASA also stressed that the agreement long predated the new LHF rules. A licence signed last Tuesday, with a suspiciously relaxed attitude to control, may get a frostier reception.
Ellie and Liam can keep their eggs. Whether anyone at Bite Back had the best Easter ever is another matter.
