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Franchising Agreements Drafting and Registration

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Franchising is a popular yet very complex transaction as it touches upon the fundamentals of both parties’ business. Accordingly, such contracts are associated with many legal niceties. Both parties’ lawyers should both know all such peculiarities and be able to explain the legal consequences of these or other conditions to the negotiating representatives of business units.
The right holder may be only represented by a profit-making organisation. This is due to the fact that franchising agreements provide for a transfer of the right to use the brand name which may only be owned by a legal entity. Therefore, no individual business person may be the right holder under a franchising agreement since he/she takes part in civil transactions under his/her own name only. A profit-making company or an individual entrepreneur may act as a user.
Such agreement is only signed as a single document. It may not be entered into by exchange of documents such as letters, fax messages or telegrams.
The agreement must be registered in a competent governmental body. For the parties the franchising agreement comes into force upon signature (or on any other date as agreed by the parties). However, in dealing with third persons, the parties to the franchising agreement may only refer to such contract after it has been duly registered. This also applies to registration of the amendments to the agreement.

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