Franchise agreement

Franchising is one of the most popular and effective business models for expanding activities and entering new markets. The international law firm Antwort Law offers comprehensive services for preparing and supporting a franchise agreement, helping both franchisors and franchisees successfully implement their commercial projects.

A franchise is a form of business cooperation in which a brand owner (franchisor) grants the right to a partner (franchisee) to use its brand, technology, business model, and other commercial assets to operate a business under its management in exchange for a royalty and a one-time entry fee from the franchisee. The franchisor expands the business without significant capital investments and direct participation in the management of new outlets, and the franchisee, in turn, gets the opportunity to work under a well-known brand with a ready-made business plan, significantly reducing risks and accelerating return on investment.

The franchise agreement must include detailed provisions governing:

- relations of the parties, obligations, and rights of each party, including the franchisor’s right to inspect the activities of the franchisee;

- terms of use of the brand;

- payments;

- confidentiality;

- conditions for termination of the contract

- the territory in which the franchisee can use the brand;

- duration of the contract and conditions for its extension;

- the amount of royalties, the frequency of their payment, the size of the entrance fee, and any other costs;

- requirements for the quality of goods and services that the franchisee must comply with;

- audit and control.

Let's take a closer look at some of the key legal features of international franchise agreements:

1. Governing Law and Jurisdiction: One of the most important aspects of an international franchise agreement is determining what law will apply to the agreement and in what jurisdiction any potential disputes will be resolved. This is especially important since franchise laws can vary significantly from country to country, and the choice of a legal system that favors the franchisor or franchisee can dramatically affect the terms and performance of the contract.

2. Intellectual Property Protection: International franchise agreements place particular emphasis on protecting trademarks, copyright, and other intellectual property assets. Therefore, it is necessary to ensure that intellectual property is protected in each country where the franchise will operate and that the franchisee complies with all requirements for its use.

3. Cultural and economic adaptations: International franchisees must adapt their products or services to the cultural and economic conditions of different countries. The contract must take into account these adaptations, stipulating what changes are permissible and how the franchisor must approve them.

4. Currency risks and tax issues: Franchisees often must pay royalties and other fees in the currency of the franchisor's country, which entails currency risks. In addition, tax regulations for foreign companies can be complex, and parties must clearly understand their responsibilities and possible tax benefits.

6. Compliance with Local Laws: Franchisees must comply with local consumer protection, employment, product safety, and other regulatory requirements. Failure to comply with these laws can result in serious legal consequences and fines.

Developing and implementing an international franchise agreement requires careful legal analysis and professional preparation. Antwort Law specializes in preparing franchise agreements, considering the specifics of the client’s business and the country’s legislation in which they plan to operate. We provide a full range of services—from legal analysis and drafting of a contract to support during its conclusion and execution. We will happily assist you in drawing up an international franchise agreement.

Lidia Ivanova

International lawyer
Antwort Law