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Franchise Agreement Business Def

As part of the most common working method, the cornerstone of a franchise system must be a trademark or trade name of a product. A franchise is a license of an owner of a trademark or business name that allows another to sell a product or service under the name or brand. A franchisee agrees to pay a fee to the franchisor in exchange for authorization to operate a business or service according to the methods and procedures prescribed by the franchisor, as well as under the commercial name or brand of the franchisor, or to sell a product or service. As a general rule, the franchisee enjoys an exclusive territory in which it is the only distributor of the goods or services concerned in that territory. The franchisor is generally contractually required to support the franchisee through advertising, promotion, research and development, volume buying, education and training and other specialized management resources. The Brazilian Franchise Act (Law 8955 of December 15, 1994) defines the franchise as a system in which the franchisor grants the franchisee, against payment, the right to use a trademark or patent, and the right to exclusive or semi-exclusive distribution of products or services. The provision of a “franchised offer circular” or disclosure document is mandatory before the contract is executed and applies to the entire Brazilian territory. Non-disclosure cancels the agreement, resulting in refunds and heavy compensation. The franchise law does not distinguish between Brazilian and foreign franchisors. The National Institute of Industrial Property (INPI) is the registration authority. The essential documents are a delivery statement (disclosure documentation) and a registration certificate (INPI). The latter is required for payments. Not all amounts can be converted into foreign currency.

Certification may also involve compliance with Brazil`s antitrust rules. There is also a risk for people who buy the franchises. However, default rates are much lower for franchises than for independent start-ups. [10] The European Franchise Federation`s code of ethics has been adopted by 17 national franchising associations. However, this does not have the force of law and the application by national associations is not uniform. In his book “The Law and Regulation of Franchising in the EU” (published in 2013 by Edward Elgar ISBN 978 1 78195 2207), commentators such as Dr Mark Abell see this lack of uniformity as one of the main obstacles to franchising, which is increasing its potential in the EU. The franchise`s business model has a turbulent history in the United States. The concept dates back to the mid-19th century, when two companies – McCormick Harvesting Machine Company and I.M Singer Company – developed organizational, marketing and distribution systems that were the precursors to franchising. These new business structures were developed in response to mass production and allowed McCormick and Singer to sell their sewing machines to a growing domestic market.