Franchising in Russia
Economy
Russia has the world's 7th largest economy based on GDP figures.
Following a period of fluctuating economic stability the Russian
economy is becoming more stable and therefore more attractive to
international franchisors.
Legislation
Russia is one of the few countries to regulate franchising under
one specific piece of legislation. The governing provisions are
those laid down in chapter 54 (articles 1,027 to 1,040) of the
Civil Code of the Russian Federation (CCRF) and general provisions
of chapter 69 on licence agreements (articles 1,235 to 1,238). In
accordance with the CCRF, franchising agreements are called
'commercial concessions', the franchisor is known as the 'right
holder' and the franchisee, the 'user'. General principles of
contract law regulate the offer and sale of franchises.
Franchise Market
The rapid development and growth of the franchise industry in
Russia makes quantifying the current size of the franchise market
difficult. The Russian Franchise Association estimated that as at
the end of 2010 there were over 150 franchise systems operating in
Russia.
The most popular franchising systems are retail and fast-food,
whereas service businesses remain very small. Despite the
popularity of the fast food industry, the fast food market is not
yet saturated.
Opportunities in the Russian franchising industry are presently
in the hotel, entertainment, education, healthcare, fitness and
real estate sectors.
Franchise Legislation
- A franchise agreement will be invalid and therefore
unenforceable unless the agreement is set out in writing and
registered with the relevant Rospatent office. In theory the
registration process should take approximately two (2) months, in
practice however this duration is much longer. For a trade mark to
be licensed (which is a prerequisite of the franchise agreement) it
must already be registered with the Rospatent or World Intellectual
Property Organisation (WIPO).
- There is no requirement for pre-contractual disclosure; however
there is an obligation for disclosure once the franchise agreement
has been concluded.
- A franchisor must supply (and continue to supply throughout the
duration of the franchise agreement, unless the franchise agreement
states otherwise) the franchisee with technical and commercial
documentation and other information necessary for the franchisee
and employees to conduct business as a franchisee.
Conclusion
Franchising is subject to specific regulation in Russia and is
one of the countries to have all specific franchising related
legislation in one piece of legislation. There are a number of
important conditions to adhere to, and therefore franchisors
seeking to enter the Russian franchising market should seek
specialist legal advice to ensure effective and accurate
compliance.