Old ties are hard to break - following in the footsteps of Russia
12 October 2007
Franchising in the Ukraine, just as in Belarus or in some of the
former Baltic States, is heavily influenced by Russian franchise
legislation. Although all these countries have their own franchise
code, the provisions are strikingly similar to the ones found in
the Russian Civil Code.
The Ukraine offers a lot of franchising opportunity for
potential franchisors. With a GDP growth rate of 4,4% and an
average age of 38 it is an interesting market for a large variety
of franchise businesses - and there is a great interest in
franchising, too! Last month the franchise conference "Franchising
in the Ukraine. Realities and Prospects for Development" took place
in association with the Ukraine Franchise Association and next
month the franchise fair "Franchise 2007" will be hosted in Kiev
for the third time.
With regard to the legal conditions for franchising in the
Ukraine, foreign franchisors will face by and large the same
obstacles as in Russia. Nevertheless since the legal systems and
regulations in Russia and the Ukraine are very similar, it is
possible to profit from the experience gained in Russia when
thinking about introducing a business concept to the Ukraine.
The main issues for foreign franchisors in the Ukraine are:
- Statutory liability of the franchisor for defective products
sold by the franchisee;
- Tax issues in cross-border franchising; and
- Registration of franchise agreements.
Unfortunately, there is currently no procedure in place for
registering franchise agreements so that in practice no
registration can occur.
This situation is often resolved by including a provision in the
agreement which deals with the fact that registration is not yet
possible.
For further information on franchising in Russia or the Ukraine,
please contact Babette Märzheuser-Wood, who is a Russian
speaker, or Mark Abell.