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Commercial concession and franchising agreements

Managing any business means drafting, changing, analyzing, as well as many other aspects of dealing with contracts. It is impossible to imagine conducting any business without concluding contracts. Therefore, it is important for every entrepreneur to understand what contractual models and constructions one can use in a given situation for the high-quality and effective business development.

One of such contractual models is a franchise agreement – an agreement according to which the person who owns the exclusive rights – the franchisor, authorizes another person – the franchisee to use such exclusive rights to develop the franchisee’s business. In turn, the franchisee pays remuneration for the use of such rights.

Franchise agreement is a win-win relationship scheme for both parties: the franchisee gets the opportunity to develop its business more efficiently under a recognizable brand, and the franchisor gets a profit and a free opportunity to further develop the brand.

When people talk about a franchise agreement, the terms “franchise packaging” or “to pack franchise” are often used. This is not about a particularly colorful envelope, in which the parties send each other an agreement for signing, but about the mechanism of working under a franchise agreement: the franchisor sells a ready-made business model, proven and effective business solutions to the franchisee. All that remains for the franchisee is to strictly and closely follow the instructions received without strong initiative.

When preparing or studying a franchise agreement, VigoLex team recommends paying attention to the following basic conditions:

For franchisor

For franchisee

  • how exhaustively the terms of use are fixed: the more detailed such terms are fixed, the less risks of destroying the reputation of your brand;
  • the franchisee’s guarantees: it is in your best interests to make sure that the franchisee does not even have a theoretical chance to harm your brand;
  • withdrawal option: in order to protect the brand, it is very important to be able to withdraw the franchise if the terms of use of the brand are not followed.

 

  • how exhaustively the details of business processes are described: the terms of the franchise are a blueprint for action, and the more detailed it is, the less “innovations” the franchisor will be able to think up in the future;
  • the possibility of consultation: while using the brand, it is very important to have the right to contact the franchisor for advice or consultation on a particular issue;
  • autonomy: it is crutial to give the franchisor the right to control the use of the brand, and not control your operations on the whole.

In addition, of course, both parties need to determine the applicable law and the court competent to consider disputes between the parties if the franchisee and the franchisor are residents of different countries.

What does a commercial concession agreement have to do with it? A commercial concession is a type of agreement stipulated in the Civil Code of Ukraine, while franchising is a form of contractual relationship that is not specifically regulated by Ukrainian law. At its core, a commercial concession agreement is an analogue of a franchise agreement in Ukraine.

VigoLex team has significant experience and high-quality legal expertise in the matters of legal support for franchising and commercial concession transactions.

VigoLex team has significant experience and high-quality legal expertise in the matters of legal support for franchising and commercial concession transactions.

VigoLex lawyers will point out:

  • what risks are included in the franchise or commercial concession agreement for each party;
  • how to “pack”, that is, legally register the franchise;
  • what rights, obligations and guarantees are best specified in the franchise or commercial concession agreement and why;
  • to what pay attention when drawing up the franchise or commercial concession agreement, etc.

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