Development of Commercial Concession Agreement (Franchising)

The commercial concession agreement, also known as franchising, is one of the most common forms of partnership in the business world. This type of agreement allows one party (franchisor) to grant another party (franchisee) the right to use its trademark, business model, and support in exchange for payment and fulfillment of certain conditions. For many entrepreneurs, the commercial concession agreement is a path to their own successful business by leveraging an already established and proven concept.

Importance of Franchising Agreements for Business

Franchising agreements are significant for businesses for several reasons:

• Enables entrepreneurs to quickly start their own business as they utilize a ready-made business concept and the franchisor’s trademark.
• Since the franchisor provides support and experience that are already proven, the risk of failure for the franchisee becomes lower compared to starting their own business from scratch.
• Franchising agreements typically include support in areas such as marketing, staff training, supply, and others, which help entrepreneurs effectively manage their business.
• Using a well-known trademark ensures greater foot traffic and consumer trust in the new enterprise.
• The franchising model facilitates rapid business expansion through opening new franchise units.

Overview of Legislative Framework Regulating Franchising and Commercial Concessions

The Ukrainian legislative framework has specific provisions regulating the conclusion and execution of franchising and commercial concession agreements. The main ones include:

• Civil Code of Ukraine. Contains general rules regarding the conclusion and execution of contracts, including franchising agreements.
• Law of Ukraine “On Consumer Rights Protection.” Establishes the rights and obligations of consumers, including rules for franchising agreements related to the quality of goods and services.
• Commercial Code of Ukraine. Contains provisions on contracts for commercial concession and their legal status.
• Law of Ukraine “On Protection of Rights to Trademarks and Service Marks.” Regulates the rules for registration and use of trademarks, which may relate to franchising agreements.

Key Elements of a Franchising Agreement

The key elements of the agreement include:

• Rights and obligations of both parties, such as the franchisor – the owner of the brand or business, and the franchisee – the individual or company receiving the right to conduct business under this brand.
• Transfer of know-how, trademarks, patents, and other intellectual property objects necessary for conducting business.
• Financial aspects, such as initial fees, royalties (payments for the use of the brand or services of the franchisor), as well as other payments that may be specified.
• Term of the agreement, as well as conditions for its renewal or termination, including conditions for termination for breach of agreement terms.

Development of Commercial Concession Agreement and Factors Affecting Cost

The development of a commercial concession agreement involves the following stages:

• Analysis of the intellectual and material property rights of the franchisor. Assessment of rights and limitations related to the brand, know-how, technologies, and other assets provided by the franchisor to the franchisee.
• Determination of key provisions of the agreement. The agreement contains important definitions regarding terms, conditions, rights and obligations of each party, as well as conditions regarding liability and dispute resolution.
• Determination of types and packages of provision to the franchisee. Establishing conditions regarding territory allocation, franchisor support, use of trademarks, training, and other services.
• Development and implementation of NDA/NDC policies. Inclusion of provisions in the agreement regarding non-disclosure of confidential information and non-competition to protect the interests of the franchisor.

The cost of developing a commercial concession agreement may depend on various factors, such as:

• Complexity and scope of work;
• Qualification of lawyers;
• Regional peculiarities, etc.

Advantages of Dextra Law

The team of qualified lawyers at Dextra Law has significant experience in the field of franchising, allowing them to effectively develop agreements considering the most efficient practices and current regulatory requirements. We offer subscription services for both franchisors and franchisees, providing continuous legal support in their relationships.

In addition to agreement development, our experts provide a full range of related legal services, such as legal analysis, consultations on intellectual property matters, and legal support in case of disputes.

Contact us now to ensure reliable and professional legal support in franchising matters. Our legal experts are ready to help you achieve success in your business.