Franchising in Bulgaria

Economy

Bulgaria’s economy is growing steadily with a GDP of USD93.805 billion.

Legislation

Currently there are no specific franchise laws in Bulgaria.

Franchise Market

The Bulgarian market is very receptive to Western brands and franchising has a presence in various industry sectors ranging from the fast food industry to retail and other service fields.

Among the top international franchisors with a firm presence in the Bulgarian market are Bally, Benetton, Century 21, Dunkin’ Donuts, KFC, McDonald’s and Pizza Hut. Some Bulgarian founded franchisors have also emerged on the market including Happy (the largest restaurant chain in Bulgaria) and Sanita (medicine distribution).

A study by the Bulgaria-based International Executive Service Corp. indicates that franchised business in Bulgaria is likely to be very cost-effective, primarily due to relatively low real estate prices, favourable wage rates for both qualified and unqualified labour, and very strong market demand.

Franchise Legislation

• The following general legal rules and regulations apply to franchising in Bulgaria:
• the Trade Act containing provisions relating to licensing contracts and general principles of trade deals
• the Obligations and Contracts Act
• the copyright and Trademark laws
• the Corporate Revenue Taxation Act
• the Individuals Revenue Taxation Act
• the VAT Act

There are no specific laws relating to the ongoing relationship between franchisor and franchisee after the franchise agreement has come into effect. However, Bulgarian law does recognise a common principle of good faith and the general obligations set out in the Obligations and Contracts Act are applicable.

Foreign investment is encouraged in Bulgaria and The Investment Promotion Act, last amended in 2006, stipulates equal treatment of foreign and domestic investors. The Act also includes an investments incentive package and encourages implementation of investment projects over a period of up to three years. This law specifically recognises intellectual properties and securities as a foreign investment.

Conclusion

A careful review of all legal documentation is essential before franchises are sold in Bulgaria. It is particularly important to employ specialist legal advice to check document compliance considering the number of applicable statutes.

For more information please contact Shelley Nadler.