Publication date: 29.05.2024
Lawyer, graduated from the National University "Odesa Law Academy" with honors. Since 2017, I have been specializing in legal and educational and general legal issues. I am the author of legal articles, scientific publications and articles in the educational environment. Mentor of the "Veritas" legal clinic. The owner of the legal blog "Educational_law_ua" on Instagram.
Franchising is one of the most popular business models in the world, allowing for the rapid scaling of a successful business by transferring the right to use a well-known trademark, technologies, and business model. In Ukraine, the franchise agreement is becoming an increasingly common tool for business development, particularly in the retail, food service, and service sectors. This article examines the main aspects of the legal regulation of franchise agreements in Ukraine, including definitions, structure of the agreement, rights and obligations of the parties, and practical aspects of concluding and executing such agreements.
Definition of Franchising
Franchising is a form of cooperation between two independent legal entities, where one party (the franchisor) transfers to the other party (the franchisee) the right to use a certain set of exclusive rights, including a trademark, brand style, technologies, and business model. According to Article 1115 of the Civil Code of Ukraine, under a commercial concession (franchise) agreement, one party undertakes to provide the other party, for a fee, the right to use in entrepreneurial activities a set of rights, including the right to a trade name, commercial information, commercial experience, and so on.
Structure of the Franchise Agreement
A franchise agreement is a complex, multi-component document that regulates various aspects of the relationship between the franchisor and the franchisee. The main elements of a franchise agreement include:
Subject of the Agreement: A description of the set of exclusive rights granted to the franchisee, including the right to use the trademark, technologies, know-how, and other commercial information.
Obligations of the Parties: A list of the obligations of the franchisor and the franchisee. The franchisor typically undertakes to provide support to the franchisee, conduct staff training, supply marketing materials, and provide consulting. The franchisee undertakes to pay franchise fees and adhere to business standards.
Payments: Definition of the types and amounts of payments to be made by the franchisee. These may include a one-time entry fee, periodic royalties, marketing fees, and other payments.
Territory and Term: Definition of the territory where the franchisee has the right to conduct business under the agreement and the term of the agreement.
Termination Conditions: Definition of the grounds for early termination of the agreement, the procedure for termination, and the consequences of termination.
Dispute Resolution: Establishing the procedure for resolving disputes between the parties, including the possibility of using arbitration or mediation.
Practical Aspects of Concluding and Executing the Franchise Agreement
Concluding a franchise agreement requires a careful approach and attention to detail. Here are some practical recommendations for both parties:
Legal Analysis: Both parties should conduct a legal analysis of the agreement to ensure its compliance with Ukrainian law and to protect their interests.
Financial Analysis: The franchisee should evaluate the financial requirements of the agreement, including initial investments, royalties, and other regular payments.
Training and Preparation: The franchisor should provide quality training and preparation for the franchisee to ensure effective use of the granted rights and technologies.
Control and Audit: The franchisor should conduct regular control and audits of the franchisee's activities to ensure compliance with standards and maintain high quality of services or products.
Conflict Resolution: Both parties should be prepared for potential conflicts and have mechanisms for their resolution, such as mediation or arbitration.
Conclusion
Analysis of documents and legal analysis of the situation establishes that the franchise agreement is an effective tool for business development, which allows the franchisor and franchisee to join forces to achieve common goals. In Ukraine, the legal regulation of franchising provides the necessary conditions for the conclusion and execution of such contracts, although it requires a careful approach to each stage. This written consultation means that both parties are well informed about their rights and responsibilities, and have adequate support and mechanisms for resolving possible conflicts. Thus, the franchise agreement can become a solid basis for successful and mutually beneficial cooperation, and if necessary, consulting a lawyer or the help of a lawyer online will help you understand such issues.
