International Franchising
The franchise industry is poised for growth, with opportunities for both new entrants and existing players. Nixon Peabody helps franchisees navigate this ever-evolving market.
Overview
The international expansion of franchising has prompted a surge of franchise-specific legislation. At least twenty-three countries have adopted some form of franchise disclosure legislation and that number seems to increase each year. There are also a number of other countries that have laws in place that impact franchise arrangements in their jurisdictions. Below we provide an overview of franchise-specific legislation as well as those laws that impact franchising in a select number of jurisdictions across the globe. We include a summary of the law, disclosure periods or required filings as well as local insights and trends in some jurisdictions. Please note that the summaries provided do not, and are not intended to, constitute legal advice and may not reflect the most up-to-date information. The summaries of a number of the countries are provided in cooperation with LexNoir Foundation and local counsel that have written for its publications or participated in it programs.
Africa
- What is the franchise-specific law?
- Nigeria does not have a franchise specific law. Instead, general commercial laws govern the rights and obligations of parties to a franchise agreement. Any agreement relating to the importation of intellectual property, must be registered with Nigeria's National Office for Technology Acquisition and Promotion ("NOTAP").
- What is the disclosure period, if any?
- There are no pre-sale franchise disclosure or similar requirements that apply to franchise transactions.
- Are there any required filings?
- NOTAP requires the franchise agreement to be registered when a franchisor is entering into an agreement with a Nigerian party and NOTAP requires a number of specific terms and conditions that must be satisfied before it will register any agreement.
- What are the penalties for failure to comply?
- The certificate of registration issued by NOTAP will be required by the Central Bank of Nigeria to authorize or effect transfer of any payment due to the franchisor under the franchise agreement. No payment will be issued to the franchisor through the Central Bank without NOTAP registration.
- Other
- The franchise agreement can be written in any language both parties understand. Any agreement required to be registered with NOTAP must be in English or accompanied by its English interpretation notarized in the country of origin.
- What is the franchise-specific law?
- There is no specific regulatory in place. Section 85 of the Consumer Protection Act No. 68 of 2008 (CPA) came into force April 1, 2011, established a National Consumer Commission (NCC), which may appoint investigators and inspectors.
- What is the disclosure period, if any?
- The Disclosure Document must be provided to prospective Franchisees at least 14 days prior to signing of any agreements. If the Franchise Agreement is up for renewal, Franchisor should provide the existing Franchisee the current Disclosure Document not less than 3 months before renewal.
- Are there any required filings?
- The CPA does not require any government filing, registration, or any approval requirement.
- What are the penalties for failure to comply?
- Failure to provide compliant disclosure, the CPA, the NCC, and the Tribunal will investigate any complaints made, enforce the CPA, and impose penalties and administration. Franchisees are entitled to the various remedies – specific performance, restitution, termination of franchise agreement and/or damages.
- Other
- The franchise agreement can be written in any language both parties understand. It is suggested the Disclosure Document and franchise agreement be in English.
- What is the franchise-specific law?
- Law-n 2009-69 enacted August 12, 2009, regulates franchise agreements. Law and Decree n 2010-1501, enacted on June 21, 2010, provides compulsory terms and conditions of a franchise agreement.
- What is the disclosure period, if any?
- At least 20 days before signing the franchise agreement.
- Are there any required filings?
- Depending on the industry, certain franchise agreements must be approved by the Trade Minister of Tunisia prior to execution.
- What are the penalties for failure to comply?
- The law is silent on the penalties for failing to comply.
- Other
- The franchise agreement can be written in any language both parties understand. If the franchise agreement must be registered with the Tax Office, it must be translated into the local language and sworn by a translator in Tunisia.
Asia
- What is the franchise-specific law?
- The Regulations on the Administration of Commercial Franchise that went into effect on May 1, 2007 (the “2007 Regulations”) along with the Administrative Measures for Archival Filing of Commercial Franchises (the “Filing Rules”) and the Administration Measures for the Information Disclosure of Commercial Franchises (the “Disclosure Rules”) govern the franchising business sector.
- What is the disclosure period, if any?
- At least 30 days prior to the date that the franchise contract is signed by the Franchisor and the Franchisee.
- Are there any required filings?
-
- Within 15 days of the execution of its first franchise agreement, a Franchisor is required to file the following:
The basic information about the commercial franchise; - The distribution of stores of all Franchisees within mainland China;
- The marketing plan of the Franchisor;
- Incorporation certificate or business license of the Franchisor;
- Registration certificate of trademark, patent, or other operation resources relating to franchise;
- Materials to prove satisfaction of the “two own stores and one year of operation” requirement;
- The first franchise agreement signed with the Franchisee within the mainland of China;
- A sample franchise agreement;
- The table of contents of the franchise operation manual.
- The franchisor’s undertaking signed by an authorized representative of the Franchisor; and
Other documents as may be reasonably requested by the Bureau of Commerce.
- Within 15 days of the execution of its first franchise agreement, a Franchisor is required to file the following:
- What are the penalties for failure to comply?
-
- Article 26 of 2007 Regulations provides that when a Franchisor requires a Franchisee to pay expenses before a franchise agreement is concluded without explaining in writing the purpose of expenses and the conditions and method for refund, the Bureau of Commerce may order Franchisor to correct and impose a fine of not less than RMB 10,000; if the circumstances are serious, imposed fines may not be less than RMB 10,000 and not more than RMB 50,000.
- When Franchisor fails to provide the required information or fails to file amendments concerning critical franchise information or fails to complete the filing formalities pursuant to the 2007 Regulations and the Filing Rules, the Bureau of Commerce may order such information be filed or such filing be completed, as applicable, and impose a fine of not less than RMB 10,000 and not more than RMB 50,000. If the circumstances are serious, imposed fines may not be less than RMB 50,000 and not more than RMB 100,000.
- If Franchisor either fails to account for fees collected from Franchisees for advertising and promotion in a timely manner, does not use the fees for such purpose, conducts advertising and promotion activities in a fraudulent or misleading manner, or the advertisements it releases contain information publicizing the profits of Franchisees from their franchise activities, the relevant market supervision and administration authority may order Franchisor to make a correction and impose a fine of not less than RMB 30,000 and not more than RMB 100,000. Where the circumstances are serious, it may impose a fine of not less than RMB 100,000 and not more than RMB 300,000.
- Other
- The required filing documents need to be in Chinese or provided with a certified Chinese translation.
- What is the franchise-specific law?
- Government Regulation No. 42 of 2007 (GR 42), effective July 23, 2007, and implementing regulation, Regulation of Minister of Trade 71 of 2019, dated September 4, 2019, (Regulation 71) governments franchising in Indonesia.
- What is the disclosure period, if any?
- At least 2 weeks prior to the execution of the franchise agreement.
- Are there any required filings?
- A Franchisor must obtain a copy of Surat Tanda Pendaftaran Waralaba (the STPW) from filing an application through the Online Single Submission System, which is integrated with the Minister of Trade’s online licensing system. The Indonesian Trademark Law provides that a licensing agreement, which includes the grant of a license in a franchise arrangement, must be recorded at the Trademark Office for it to bind a third party.
- What are the penalties for failure to comply?
- Government Regulation No. 42 stipulates that a fine will be imposed on a Franchisor or Franchisee that has not obtained a STPW following three written warnings. The maximum fine imposed is one hundred million Rupiah. Regulation 71 provides that STPW will be revoked if up to three written warnings of non-compliance are received. Additionally, Regulation 71 states that the STPW will be revoked if the franchise criteria are not fulfilled or if the franchise stakeholders use the franchise logo without obtaining STPW first.
- What is the franchise-specific law?
- In Japan, a Franchisor’s duty to make presale disclosures to prospective Franchisees arises from two different sources: the Medium-Small Business Retail Promotion Act (the Act), supplemented by the Ministerial Order to Implement the Act (the Ministerial Order), and the Guidelines on Franchising under the Antimonopoly Act (the Guidelines).
- What is the disclosure period, if any?
- The Act requires the delivery of a Disclosure Document to be made “before concluding a contract with [a Franchisee].” The Guidelines provide that, notwithstanding the text of the Act, “from the viewpoint of the Antimonopoly Act,” a Disclosure Document must be delivered sufficiently in advance so that the prospective Franchisee can make an informed decision.
- Are there any required filings?
- There is no filing or registration required with regard to franchising in Japan.
- What are the penalties for failure to comply?
- If a contract term or the whole contract is found to constitute an unfair trade practice, the Japanese Fair Trade Commission may issue a cease and desist order (art. 19 of the Antimonopoly Act) and must impose a surcharge on Franchisor, if the abuse is committed continuously (art. 20-6 of the Antimonopoly Act). The amount of the surcharge is calculated as 1 percent of the gross sales from Franchisee over the previous three years from the day when Franchisor terminates its abuse (either voluntarily or as a result of the cease and desist order).
- What is the franchise-specific law?
- The Act on Fairness in Franchise Transactions.
- What is the disclosure period, if any?
- At least 14 days (seven days if Franchisee has consulted either an attorney, or a licensed franchise dealer) have elapsed from the date of provision.
- Are there any required filings?
- While the Korea Fair Trade Commission registers any Disclosure Document, foreign Franchisors without a local subsidiary submits a Disclosure Document to the Korea Fair Trade Mediation Agency for their review. For Franchisors residing in Korea, Disclosure Documents must be submitted to the mayor or governor of the competent local government in which the principal office of Franchisor is located. Under the Trademark Act, an exclusive license must be recorded with the Korea Intellectual Property Office (KIPO) to be effective.
- What are the penalties for failure to comply?
-
Providing false or exaggerated information or the omission of important items can lead to a penalty of up to five years of imprisonment or a fine of not more than KRW 300 million.
If Franchisor fails to meet the disclosure period requirement, Franchisor may not receive the franchise fee from Franchisee and may be subjected to a possible term of imprisonment of up to two years or a fine of up to KRW 50 million.
- Other
- The Korea Fair Trade Commission requires Franchisor to prepare the Disclosure Document in the Korean language and all supplementing documents (e.g., the franchise agreement, financial statements, etc.) for purposes of registering the Disclosure Document to be translated into the Korean language.
- What is the franchise-specific law?
- The Macau Commercial Code (the MCC), approved in 1999, amended in 2000 and 2009, regulates and defines the franchise agreement under Articles 679 to 707.
- What is the disclosure period, if any?
- A "reasonable" amount of time before the franchise relationship is established.
- Are there any required filings?
- Under the MCC, there is no governmental filing, registration, or approval requirement that must be satisfied prior to signing a franchise agreement.
- What are the penalties for failure to comply?
- There are no criminal remedies for the violation of the obligations. However, civil litigation action can be pursued in court to obtain compensation.
- What is the franchise-specific law?
- The Franchise Act 1998 (the Act), which was amended by the Franchise (Amendment) Act 2012 that came into force on January 1, 2013, and the Franchise (Forms and Fees) Regulations 1999 (the Regulations), which were amended by the Franchise (Forms and Fees) (Amendment) Regulations 2007 that came into force on December 14 2007, are intended to apply to all franchises operating in Malaysia.
- What is the disclosure period, if any?
- At least 10 days before execution of the franchise agreement.
- Are there any required filings?
- Under Section 6(1) of the Act, a Franchisor (which includes a Master Franchisee) must register its franchise with the Registrar prior to operating a franchise business or making any offer for sale of the intended franchise. Pursuant to Section 6B of the Act, the Franchisee of a local Master Franchisee of the foreign Franchisor, and the local Sub-franchisee, must register the franchise by filing its application within 14 days after the date the agreement between the Franchisor and the Franchisee was signed.
- What are the penalties for failure to comply?
- Under current law, a franchise agreement is automatically deemed null and void if it does not include the minimum prescribed provisions under Section 18 of the Act.
- Other
- Local Franchisors or Master Franchisee generally need to file the copy of the franchise agreement in both English and Bahasa Malaysia. Franchisee needs only file the copy of the franchise agreement as signed in either English or Bahasa Malaysia.
- What is the franchise-specific law?
- The Fair Trade Commission Disposal Directions on the Business Practices of Franchisors (the “Guidelines”) govern franchise issues and transactions.
- What is the disclosure period, if any?
- At least ten days, a reasonable time period as the case may require, or the time period agreed by both parties, before the franchise relationship or preparatory franchise relationship is established.
- Are there any required filings?
- A “merger filing” may be required for opening additional franchise stores if the business transaction is deemed to be a business combination where the applicable market-share threshold or annual turnover threshold is met. Additionally, a short-form franchise trademark license may be desirable because trademark licenses are not effective against third parties unless the license is properly registered with the Taiwan Intellectual Property Office.
- What are the penalties for failure to comply?
- The Fair Trade Commission may order the violating party to cure the violation within a specified time period and/or assess an administrative fine of NT$50,000 to NT$25 million (approximately US$1,800 to US$900,000 in 2022) on the violating party. But there is no criminal punishment for the violations. Franchisee may sue for tort action under the Fair Trade Law and treble damages may be allowed if Franchisor is intentionally violating the law and affecting the trade order.
- Other
- Disclosing information in English to a Franchisee is not prohibited, but it is advisable and desirable to prepare a Chinese translation since the business language commonly used is Chinese.
Australia/Oceania
- What is the franchise-specific law?
- The Competition and Consumer (Industry Codes—Franchising) Regulation 2014. It is known as the Franchising Code of Conduct (the Code).
- What is the disclosure period, if any?
- At least 14 days before entering into a franchise agreement, making a nonrefundable payment, or renewing or extending existing agreement
- Are there any required filings?
- There are currently no governmental filing, registration, or approval requirements under the Code that must be satisfied prior to providing a disclosure document.
- What are the penalties for failure to comply?
- The Code imposes pecuniary penalties of 300 penalty units (currently AUS$66,600) applicable for breaches of specific sections of the Code. It is expected to be doubled to 600 penalty units in 2022 and some contraventions may attract significantly higher penalties exceeding AUS$10 million.
Europe
- What is the franchise-specific law?
- Belgium has no specific legislation on franchise agreements. Various provisions of the Economic Law Code, such as Article I.11, 2° and Articles X.26 to X.34, and the general principles of Belgian contract law govern the franchise agreements in Belgium. Additionally, for those franchisors who adhere to Belgian Franchise Federation (or another European franchise association that proclaims adhesion to the European Code of Ethics), they must reference the European Code of Ethics for Franchising.
- What is the disclosure period, if any?
- At least 30 days before the renewal, conclusion, or modification of the franchise agreement.
- Are there any required filings?
- An excerpt of trademark license agreements or a joint declaration signed by the licensor and the licensee must be filed with the Benelux Intellectual Property Office or any of the three trademark national authorities for the licenses to be valid against third parties.
- What are the penalties for failure to comply?
- Belgian laws do not impose fines, issue government order or take actions for failing to comply with the disclosure requirements. But the laws provide that the Franchisees can claim the nullity of the entire agreements for the two years following the conclusion of the franchise agreements if the Franchisors failed to comply with the disclosure requirements. Similar sanctions also apply to renewals.
- Other
- The franchise agreements that apply in Belgium should be in Dutch or French in clear and straightforward language unless it can be established by the Franchisor that the prospective Franchisee has a sufficient command of English.
- What is the franchise-specific law?
- Law Number 89-1008 of December 31, 1989, Relative to the Development of Commercial and Trade Enterprises and the Improvement of Their Economic, Legal, and Social Environment governs franchising in France. This law, “Loi Doubin,” is a mandatory pre-contract disclosure regime. It was integrated into the French commercial code as Articles L. 330-3 and R 330-1. The law came into effect on January 4, 1990. The implementing decree specifying the information to be disclosed under the Loi Doubin was adopted by Decree Number 91-337 of April 4, 1991.
- What is the disclosure period, if any?
- At least 20 days before the execution of the franchise agreement (including a binding letter of intent) or the payment of any money.
- Are there any required filings?
- French law does not require the filing or registration with any governmental authority.
- What are the penalties for failure to comply?
- There are specific fines for failure to comply with disclosure obligations, even if such failure is not intentional.
- What is the franchise-specific law?
- Germany does not have any specific franchise laws or regulations. Court decisions have a significant impact on franchising relationships, especially disclosure issues.
- What is the disclosure period, if any?
- There are no fixed deadlines set by the courts; a best practice is to provide disclosure not less than two weeks before the executing the agreement.
- Are there any required filings?
- There is no requirement that a governmental filing, registration, or approval by any government agency be made or obtained in the process of entering into a contract with a prospective Franchisee.
- What are the penalties for failure to comply?
- Pursuant to Section 311, paras. 2 and 3, and Section 280 of the German Civil Code, Franchisee must be put in the same position as if Franchisor had complied with its disclosure obligation. If Franchisee would not have entered into the agreement if full disclosure had been given, the agreement is annulled. Franchisor must refund all of the franchise fees and also reimburse Franchisee for all of the investments made in connection with the franchise operation. However, any income earned from the franchise operation is to be deducted from that sum.
- What is the franchise-specific law?
- Law no. 129/04 on “rules on the regulation of franchise”.
- What is the disclosure period, if any?
- At least 30 days before the execution of the contract.
- Are there any required filings?
- There are no governmental filing, registration, or approval requirements under the Law that must be satisfied prior to signing a franchise agreement.
- What are the penalties for failure to comply?
- Non-defaulting party is entitled to compensation for the damages deriving from the breach. In the event of unfair practices, ICA can impose a pecuniary penalty ranging from Euro 5,000 to Euro 5 million. There are no criminal remedies.
- What is the franchise-specific law?
- As of January 1, 2021, Articles 7:911-922 DCC (the "Franchise Act") contain obligations with respect to a wide range of topics relating to franchising. The general contract provisions of the Dutch Civil Code govern topics that are not regulated under the Franchise Act.
- What is the disclosure period, if any?
- At least 4 weeks before conclusion of the franchise agreement.
- Are there any required filings?
- There is no governmental filing, registration, or approval required when entering into a franchise agreement in the Netherlands. Merger control filings do not apply to franchise agreements in the Netherlands.
- What are the penalties for failure to comply?
- Dutch law does not impose penalties on a Franchisor that fails to comply with the disclosure obligations included in the Franchise Act.
- What is the franchise-specific law?
- Romania has enacted the Government Ordinance No. 52/1997 and its amendments to regulate franchises (collectively referred to as the "Franchise Law"). The provisions of the Franchise Law are supplemented with the provisions of the Romanian Civil Code and Fiscal Code.
- What is the disclosure period, if any?
- The prospective Franchisee or Master Franchisee must, in all circumstances, be furnished with the relevant information prior to undertaking any obligations with respect to the franchised business. There are no official guidelines, but common practice indicates that a general range of 15 to 30 days would be considered reasonable.
- Are there any required filings?
- The Franchise Law requires no governmental filing, registration, or approval prior to signing a franchise agreement, upon accepting money for franchise rights, or when providing a Disclosure Document. However, the Franchisor may register the Disclosure Document with the National Franchise Registry ("RFN") for free. Trademark license agreements or a short form of the franchise agreement that contains the license provisions found in the franchise agreement must be registered with the Romanian State Office for Inventions and Trademarks (the “RSOIT”).
- What are the penalties for failure to comply?
- No governmental fines or remedies are available for failure to comply with disclosure requirements.
- Other
- The franchise agreement or licensing section must be translated into the Romanian language prior to its filing with the RSOIT.
- What is the franchise-specific law?
- There is no specific franchise regulation in Russia. Russia regulates franchises in its Civil Code (Part II, Chapter 54). The key element of a "Franchise agreement" subject to the Code is the franchisor's trademark. Specifically, "[I]n the absence of a registered trademark, the contract may not be treated or interpreted as being a franchise agreement." To register a trademark in Russia, a franchisor must either register it directly with Rospatent (the Russian trademark authority) or with the WIPO with Russia being a designated country.
- What is the disclosure period, if any?
- There are no pre-sale franchise disclosure or similar requirements apply to franchise transactions.
- Are there any required filings?
- A franchise agreement must be registered with Rospatent after execution.
- What are the penalties for failure to comply?
- An unregistered franchise agreement is unenforceable in Russia and subject to judicial notification.
- Other
- The franchise agreement can be written in any language both parties understand. The Russian Franchise Association is a non-profit organization taht promotes franchising activities in Russia. Membership in the Russian Franchise Association is voluntary, but it may provide foreign franchisors with useful practical advice about franchises in the Russian market.
- Current Trends
- Russia is currently subject to various international sanctions that may preclude the offer of franchises in Russia. Franchisors should ensure that any potential business activities and relationships in Russia are compliant with applicable sanctions.
- What is the franchise-specific law?
- Article 62 of Spanish Act 7/1996 of 15 January 1996, on the Regulation of Retail Trading (Ley 7/1996, de 15 de enero, de Ordenación del Comercio Minorista) (the “RTA”) is the statute regulating franchising in Spain. It was implemented by Royal Decree 201/2010 of 26 February 2010 (Real Decreto 201/2010, de 26 de febrero, por el que se regula el ejercicio de la actividad comercial en régimen de franquicia y la comunicación de datos al registro de franquiciadores). In addition, the Spanish Civil Code governs franchise relationship and contracts.
- What is the disclosure period, if any?
- At least 20 calendar days prior to execution of the franchise agreement or pre-agreement or payment by the prospective Franchisee to Franchisor of any consideration.
- Are there any required filings?
- Trademark registration at the OEPM or at the Office for the Harmonization of the Internal Market for European Community Trademarks.
- What are the penalties for failure to comply?
- Pursuant to Article 68.3, the potential penalties for failure to comply with disclosure requirements are government fines that can be up to €6,000. It may be increased to €30,000 for repeated violations. And if the turnover of Franchisor is over €600,000, the fines may be increased to €900,000. Although administrative penalties are provided in Article 68 for failure to comply with disclosure obligations, they are rarely imposed.
- What is the franchise-specific law?
- Franchising in Sweden is regulated according to general business laws, the European Vertical Block Exemption (the “VBER”) and the specific Swedish Franchise Disclosure Act (lagen 2006:484 om franchisegivares informationsskyldighet) (the “Act”).
- What is the disclosure period, if any?
- The Act requires that Franchisor provide the Disclosure Document in “due time” before the franchise agreement is entered. The Preparatory Works (which are the documents prepared for Parliament in connection with the new law to indicate the intentions of the law) indicate that a period of somewhere between 14 calendar days and three weeks is a sufficient cooling-off period in most cases. Only by exception will a time period of less than 14 calendar days be considered due time.
In situations where the Disclosure Document is particularly extensive and Franchisee makes a major investment, the Preparatory Works suggest that a longer time period is reasonable. - Are there any required filings?
- There is no requirement to file a Disclosure Document with any government agency. Consequently, there are no requirements for licenses or permits to sell franchises.
- What are the penalties for failure to comply?
- Under the Act, failure to disclose does not affect the validity of the franchise agreement, nor does it entitle Franchisee to terminate the franchise agreement or to be awarded damages. The main remedy is an action for specific performance in the Swedish Patent and Market Court (Patent- och marknadsdomstolen).
- Other
- The Preparatory Works indicate that the information must, as a general rule, be in Swedish.
Middle East
- What is the franchise-specific law?
- The Saudi Arabia Cabinet Decision No. 122/1441 on the approval of the Commercial Franchise Law (the “Franchise Law”) was passed in late 2019 and came into force on April 22, 2020. It applies to all franchise agreements implemented within Saudi Arabia.
- What is the disclosure period, if any?
- At least 14 days before the conclusion of the franchise agreement, or from the date of payment of any fee by Franchisee concerning the franchise, whichever is earlier.
- Are there any required filings?
- The executed franchise agreement and the franchise disclosure document must be registered with the Ministry. This registration remains valid for the duration of the franchise agreement. The Franchise Law also requires that Franchisor files a cancellation of the registration and notify the authority for Intellectual Property that the license for trademarks has ended.
- What are the penalties for failure to comply?
- The parties involved may seek civil remedies for the other party’s breaches and violations.
- Other
- Under the Franchise Law, the franchise agreement and the disclosure document must be written in Arabic.
The Americas/Caribbean
- What is the franchise-specific law?
- The Brazilian government approved a new franchise law (Law 13,966/2019) (“New Franchise Law”) on December 26, 2019. It became effective on March 26, 2020 and revoked former Law 8,955/94.
- What is the disclosure period, if any?
- At least 10 days prior to the execution of any binding document (including a letter of intent) related to the franchise and/or receipt of any payment.
- Are there any required filings?
- International franchise agreements must be filed with and accepted by the Brazilian Patent and Trademark Office (the “Instituto Nacional da Propriedade Industrial” or “INPI”). After the INPI process is complete, an international franchise agreement needs also to be registered at the Central Bank of Brazil (BACEN).
- What are the penalties for failure to comply?
- Failure by Franchisor to supply the disclosure document at least 10 days prior to the execution of the agreement or payment by Franchisee entitles Franchisee to claim the franchise agreement to be void or voidable and to penalize Franchisor with the refund of all amounts paid by Franchisee.
- Other
- The franchise agreements that apply exclusively in Brazil must be in Brazilian Portuguese in clear and straightforward language. Electronic signatures are acceptable under local law.
- What is the franchise-specific law?
- Article 142 of the Mexican Industrial Property Law and corresponding regulations.
- What is the disclosure period, if any?
- At least 30 business days prior to entering into the franchise agreement.
- Are there any required filings?
- All trademark license agreements must be filed with the IMPI to be effective against the infringement of third parties.
- What are the penalties for failure to comply?
- Violations of disclosure requirements may result in:
- An administrative violation, which may result in fines, temporary or permanent closure of Franchisor’s business and administrative arrests for up to 36 hours. Fines are the most likely sanction to be assessed by IMPI.
- Voiding or rescission of the franchise agreement.
Violations of a franchise agreement may result in:- Civil claims for breach of contract seeking (i) specific performance or (ii) rescission of the franchise agreement with the injured party having standing to demand payment of direct damages and losses.
- IMPI using its limited injunctive relief to enjoin the breaching party from marketing certain products when the marketing constitute a violation of intellectual property rights, order the seizure of merchandise, or order the closure of a business
- Criminal remedies in connection with repeated violations of rights protected by the Industrial Property Law, forgery of trademarks to obtain illicit profits and disclosure of confidential information deemed to be an industrial secret.
- What is the franchise-specific law?
- There is no franchise specific legislation in Trinidad and Tobago. Agreements are governed by common law principles by which the parties are virtually free to negotiate the terms of the contract, provided such terms are not in breach of public policy regarding restraint of trade. A foreign investor is free to enter into franchising agreements with local persons.
- Are there any required filings?
- In Trinidad, there are exchange control laws, however, these laws only apply in circumstances where foreign exchange is bought, sold, lent and/or borrowed. As a general matter, payment in foreign currency under a franchise agreement will not be in contravention of exchange control laws.
- Other
- Generally, royalty payments payable to non-resident franchisors will be subject to withholding tax in Trinidad. The rates are based on the country of residence of the franchisor and the applicable double taxation treaty (if any) between Trinidad and that country. In this case, there is a double taxation treaty between Trinidad and the United States. And, as a result, the withholding rate on royalties would be limited to 15 percent. It is usual or customary to include grossing up provisions where remittances are subject to withholding tax. Territory Visits by franchise management representatives - The issue of work permits will arise in relation to visits by franchisor representatives. The Immigration Act states that a foreign national could enter Trinidad and work for a period of thirty days in any twelve-month period. However, this is a one-time entry and is not counted in the aggregate, meaning that the foreign national cannot come on several trips over the said twelve-month period and stay thirty days in the aggregate.