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Jurisdictions covered

The following 22 jurisdictions are covered in this report:

Australia; Canada; Chile; Finland; France; Germany; Indonesia; Japan; Korea; Malaysia; Mexico; Netherlands; New Zealand; Norway; Russia; South Africa; Switzerland; Thailand; Ukraine; United Arab Emirates; United Kingdom; United States.

Questions

The set of questions relating to the topic of franchise and answered by the guide for each jurisdiction covered include:

Overview

• • What forms of business entities are relevant to the typical franchisor?
• • What laws and agencies govern the formation of business entities?
• • Provide an overview of the requirements for forming and maintaining a business entity.
• • What restrictions apply to foreign business entities and foreign investment?
• • Briefly describe the aspects of the tax system relevant to franchisors. How are foreign businesses and individuals taxed?
• • Are there any relevant labour and employment considerations for typical franchisors? (What is the risk that a franchisee could be deemed an employee of the franchisor? What can be done to reduce this risk? What is the risk that employees of a franchisee could be deemed employees of the franchisor? What can be done to reduce this risk?)
• • How are trademarks and know-how protected?
• • What are the relevant aspects of the real estate market and real estate law?
• • How widespread is franchising in your jurisdiction? In which sectors is franchising common?

Laws and agencies that regulate the offer and sale of franchises

• • What is the legal definition of a franchise?
• • Which laws and government agencies regulate the offer and sale of franchises?
• • Describe the relevant requirements of these laws and agencies.
• • What are the exemptions and exclusions from any franchise laws and regulations?
• • Does any law or regulation create a requirement that must be met before a franchisor may offer franchises?
• • Are there any laws, regulations or government policies that restrict the manner in which a franchisor recruits franchisees or selects its or its franchisees’ suppliers?
• • What is the compliance procedure for making pre-contractual disclosure in your country? How often must the disclosures be updated?
• • In the case of a sub-franchising structure, who must make pre-sale disclosures to sub-franchisees? If the sub-franchisor must provide disclosure, what must be disclosed concerning the franchisor and the contractual or other relationship between the franchisor and the sub-franchisor?
• • What due diligence should the parties undertake before entering a franchise relationship?
• • What information must the disclosure document contain?
• • Is there any obligation for continuing disclosure?
• • How do the relevant government agencies enforce the disclosure requirements?
• • What actions can franchisees take to obtain relief for violations of disclosure requirements? What are the legal remedies for such violations? How are damages calculated? If the franchisee can cancel or rescind the franchise contract, is the franchisee also entitled to reimbursement or damages?
• • In the case of sub-franchising, how is liability for disclosure violations shared between franchisor and sub-franchisor? Are individual officers, directors and employees of the franchisor or the sub-franchisor exposed to liability? If so, what liability?
• • In addition to any laws or government agencies that specifically regulate offering and selling franchises, what are the general principles of law that affect the offer and sale of franchises? What other regulations or government agencies or industry codes of conduct may affect the offer and sale of franchises?
• • Other than franchise-specific rules on what disclosures a franchisor should make to a potential franchisee or a franchisee should make to a sub franchisee regarding predecessors, litigation, trademarks, fees etc, are there any general rules on pre-sale disclosure that might apply to such transactions?
• • What actions may franchisees take if a franchisor engages in fraudulent or deceptive practices in connection with the offer and sale of franchises? How does this protection differ from the protection provided under franchise sales disclosure laws?

Legal restrictions on the terms of franchise contracts and the relationship between parties in a franchise relationship

• • Are there specific laws regulating the ongoing relationship between franchisor and franchisee after the franchise contract comes into effect?
• • What mechanisms are commonly incorporated in agreements to ensure operational compliance and standards?
• • May the franchisor unilaterally change operational terms and standards during the franchise relationship?
• • Do other laws affect the franchise relationship?
• • Do other government or trade association policies affect the franchise relationship?
• • In what circumstances may a franchisor terminate a franchise relationship? What are the specific legal restrictions on a franchisor’s ability to terminate a franchise relationship?
• • In what circumstances may a franchisee terminate a franchise relationship?
• • How are renewals of franchise agreements usually effected? Do formal or substantive requirements apply?
• • May a franchisor refuse to renew the franchise agreement with a franchisee? If yes, in what circumstances may a franchisor refuse to renew?
• • May a franchisor restrict a franchisee’s ability to transfer its franchise or restrict transfers of ownership interests in a franchisee entity?
• • Are there laws or regulations affecting the nature, amount or payment of fees?
• • Are there restrictions on the amount of interest that can be charged on overdue payments?
• • Are there laws or regulations restricting a franchisee’s ability to make payments to a foreign franchisor in the franchisor’s domestic currency?
• • Are confidentiality covenants in franchise agreements enforceable?
• • Is there a general legal obligation on parties to deal with each other in good faith during the term of the franchise agreement? If so, how does it affect franchise relationships?
• • Does any law treat franchisees as consumers for the purposes of consumer protection or other legislation?
• • Must disclosure documents and franchise agreements be in the language of your country?
• • Describe the types of restrictions placed on the franchisees in franchise contracts?
• • Describe the aspects of competition law in your country that are relevant to the typical franchisor. How are they enforced?
• • Describe the court system. What types of dispute resolution procedures are available relevant to franchising?
• • Describe the principal advantages and disadvantages of arbitration for foreign franchisors considering doing business in your jurisdiction.
• • In what respects, if at all, are foreign franchisors treated differently from domestic franchisors?