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Franchise and concession contract

The Russian legislation does not comprise the notion of "franchising".  This kind of transactions is called "a contract of commercial concession", but its common name is "franchising" or "franchise".

Under this kind of contracts, one party (right holder) transfers for compensation to another party a whole business complex comprising:

  • exclusive rights, including the right to the trademark,
  • business reputation;
  • commercial experience.

Roughly speaking, the beneficiary in this transaction receives an already proven and efficient business model, and he/she does not need to spare extra time and resources for development work and advertising, search for contractors and clients.

Obligatory provisions of a contract of commercial concession are as follows:

  • the right to use a trademark is provided;
  • quality of goods or services of the beneficiary may not be lower than that of the right holder. If complaints as to quality arise, a client may assert claims to either party to a contract of concession;
  • after the rights are transferred, the right holder will continue to monitor the work of the beneficiary, provide necessary assistance to him/her, conduct joint advertising actions, train personnel, provide advertising materials, hold briefings, etc.
  • a franchising contract is subject to mandatory registration with Rospatent.