Under the contract of commercial concession one party (right holder) undertakes to provide the other party (user) with the right to use in the user's business activities the complex of exclusive rights belonging to the right holder, including the right to a trademark, service mark, as well as the rights to other objects of exclusive rights provided for in the contract, in particular to a commercial designation, production secret (know-how) for a fee for a term or without specifying a term.
The contract of commercial concession provides for the use of a set of exclusive rights, business reputation and commercial experience of the right holder in a certain volume (in particular, with the establishment of a minimum and (or) maximum volume of use), with or without the indication of the territory of use in relation to a certain area of business activity (selling goods received from the right holder or produced by the user, carrying out other commercial activities, performing works, providing services).
The parties to the contract of commercial concession may be commercial organizations and citizens registered as individual entrepreneurs.— Civil Code of the Russian Federation Article 1027. Contract of commercial concession
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Franchising agreement - (Art. 1027 Civil Code of the Russian Federation) is a contract under which one party (right holder) shall undertake to grant to the other party (user) for remuneration for a definite term or without reference to a term the right of using in the business of the user a complex of exclusive rights belonging to the right holder, including the right to the firm's name and/or the commercial designation of the right holder, to protected commercial information, and also to other contracted objects of exclusive rights - trademarks, service marks, etc
Whether you are a successful business owner who wishes to expand, or you are an entrepreneur who has an eye for developing an existing business format, it is not easy to make the next step. Circumstance can often dictate whether dreams will ever become a reality. Cost, assets, stock and cash flow are all potential hurdles which can prevent you making the right moves for your business.
There is a progressive solution if your business is being impeded by such problems. Whatever the reason, franchise agreements allow you to expand your business, add further revenue streams and grow the brand you have built in a manner which reduces your risk but leverages your success and expertise.
Franchises are a rapidly expanding area of business in the Russian Federation, with an average growth of 15% as of 2015. Since 2011 growth has expanded as amendments to the civil code created a fairer model which afforded better protection to franchisors (those that have sold the franchise). This environment has also allowed companies outside Russia to consider the franchise model as a safer way to expand without incurring too much cost or risk.
If you are currently in such a situation or wish to invest your money in what you think to be a successful franchise, the legal framework required to establish this arrangement is of paramount importance. The franchise agreement or commercial concession must be made in written form, and as such enforceable much like a contract. Having this document legally drafted by Zhuravlev&Partners will ensure you do not give away any unintended powers, or pay out a large sum for rights which do not give you the necessary access to the franchise you anticipated. We have much experience with these types of agreement and we can happily discuss what your best options are.
Unless explicitly stated, franchise agreements run for 5 years or until the bankruptcy is declared by either party. A long time trying to prevent the latter, if you find out you have signed up to the wrong deal.
By their nature, Franchisors agreements must include the licencing of Intellectual property of the brand. At the very least the Trademark of the business must be included in the agreement, although it could also include patents, trade secrets or copyright. This means the agreement and all IP rights conferred by it must be subject to correct legal registration with Rospatent.
Commercial concessions in the Russian Federation are very flexible and open but require precise wording to protect intellectual property and ensure the agreement is enforceable as intended. Don’t take short cuts to safeguarding your business with inadequate legal advice. Consult experienced intellectual property advisors Zhuravlev&Partners to avoid delay, disappointment or worse. With our experience, we can draft your franchise agreements for your protection and peace of mind.