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Practices

Franchising in Kazakhstan

Economy

Kazakhstan's economy is the 54th largest in the world based on GDP, but growing at an increasing rate. Kazakhstan is currently focusing upon economic diversification and a shift from reliance upon extraction of their natural resources to processing/manufacturing.

Legislation

Franchising is regulated under various pieces of legislation including the Rules on registration of license and sublicense agreements for the use of industrial property objects, dated 10 August 2001 No.31, the Law on trademarks, service marks and appellations of origin dated 26 July 1999, No.456-I, the Laws on franchising governed by Law No.330 of 2002 the Republic of Kazakhstan and the Integrated Business License laws dated 24 June 2002 No.330-II.

Franchise Market

Franchising is a relatively new business concept in Kazakhstan. However as Kazakhstan has the second highest per capita GDP in the former Soviet Union, there is significant scope for future growth.

15-20% of the population is middle class and account for 50-70% of the financial value of all goods sold in Kazakhstan, and this tends to be the target group which overseas franchisors and international brands are currently focused upon.

There are several well known U.S. brands in the Kazakhstan market, but on a limited scale. Most franchises operate in the retail, business services, consumer services (hairdressing salons, cleaning, dry cleaning), mass media, and fast food sectors.

Franchise Legislation
  • The franchise agreement must be registered with the Patent office of the Republic of Kazakhstan. Registration is estimated to take six (6) weeks, however in practice this can often take up to four (4) months.
  • Failure to register the franchise agreement will not invalidate the agreement nor render the terms of the agreement unenforceable, however registration remains mandatory.
  • The franchisor must provide pre-contractual disclose to the potential franchisee and must warn the potential franchisee regarding the confidential and commercial nature of the information supplied to the franchisee.
Conclusion

The franchise industry in Kazakhstan is governed by various pieces of legislation and as a result any franchisors seeking to enter the franchise market in Kazakhstan should seek specialist legal advice to ensure their legal agreements are effective and compliant with the various legislative conditions in Kazakhstan.