Post by account_disabled on Mar 12, 2024 22:18:33 GMT -5
The new law for the regulation of business franchises, Law 13,966/2019, was enacted on December 27, 2019, which will come into force 90 days after that date, repealing Law 8,955/1994, which dealt with the same topic.
The new law is, in reality, a more comprehensive text, compared to the previous law, and which brings practical aspects that are common in the relationship between franchisor and franchisees, as is the case, for example, with the provision for franchisees' association, normally created to decide on the application of marketing funds, strengthening the brand and other matters of a commercial nature.
The new diploma also reinforces the lack of an employment relationship between the franchisor and the franchisee and between the franchisor and the franchisee's employees, a matter that is still being questioned Portugal Mobile Number List before the Judiciary, with such judgments being in favor of the franchisors in the majority, which are considered illegitimate party, and are therefore excluded from the actions. In decisions on the subject, it was established that the franchisor's rights regarding the requirements regarding procedures, standards and training of the franchisee's employees do not characterize subordination or outsourcing of services, thus inhibiting the employment relationship that is sought[1].
Another innovation in this legal text is to highlight the absence of a consumer relationship between the contracting parties of the franchise contract, as in the case of a commercial contract, where the franchisee is normally a businessman, the requirements of the Consumer Protection Code are not present. [2], since the franchisee could not be classified as the final recipient in the franchise contract, as he provides services or sells something to his customers, not being at the end of the supply chain.
Franchise offer circular (COF)
The COF is a document that must be sent to the franchisee at least 10 days before signing the pre-contract or franchise agreement, or even any payment by the franchisee. This is an elementary document and as important as the franchise agreement, as it is based on it that the investor becomes aware of relevant information about the business.
According to the new text, the COF must contain information about franchisees who left in the last 24 months, instead of the 12 months of the previous law. This change is important, as it will give the franchisee more information to evaluate whether or not the investment will be made. This is because one of the biggest warnings about the viability of a franchise or franchise network is the closure of many units, which can signal its economic and financial non-sustainability.
An issue that is still very relevant in franchise contracts is territoriality. The law continues to allow whether or not exclusivity exists in a given territorial area. However, it requires the franchisor to clarify in the COF whether and what the rules of competition exist between its own and franchised units and between franchisees.
There is also the obligation to indicate which suppliers the franchisee must hire to support or supply his franchise, a situation very present in franchise contracts linked to food, for example, where a standard is required in all stores in a chain of stores, in order to maintain the quality of products linked to the brand.
The new law is, in reality, a more comprehensive text, compared to the previous law, and which brings practical aspects that are common in the relationship between franchisor and franchisees, as is the case, for example, with the provision for franchisees' association, normally created to decide on the application of marketing funds, strengthening the brand and other matters of a commercial nature.
The new diploma also reinforces the lack of an employment relationship between the franchisor and the franchisee and between the franchisor and the franchisee's employees, a matter that is still being questioned Portugal Mobile Number List before the Judiciary, with such judgments being in favor of the franchisors in the majority, which are considered illegitimate party, and are therefore excluded from the actions. In decisions on the subject, it was established that the franchisor's rights regarding the requirements regarding procedures, standards and training of the franchisee's employees do not characterize subordination or outsourcing of services, thus inhibiting the employment relationship that is sought[1].
Another innovation in this legal text is to highlight the absence of a consumer relationship between the contracting parties of the franchise contract, as in the case of a commercial contract, where the franchisee is normally a businessman, the requirements of the Consumer Protection Code are not present. [2], since the franchisee could not be classified as the final recipient in the franchise contract, as he provides services or sells something to his customers, not being at the end of the supply chain.
Franchise offer circular (COF)
The COF is a document that must be sent to the franchisee at least 10 days before signing the pre-contract or franchise agreement, or even any payment by the franchisee. This is an elementary document and as important as the franchise agreement, as it is based on it that the investor becomes aware of relevant information about the business.
According to the new text, the COF must contain information about franchisees who left in the last 24 months, instead of the 12 months of the previous law. This change is important, as it will give the franchisee more information to evaluate whether or not the investment will be made. This is because one of the biggest warnings about the viability of a franchise or franchise network is the closure of many units, which can signal its economic and financial non-sustainability.
An issue that is still very relevant in franchise contracts is territoriality. The law continues to allow whether or not exclusivity exists in a given territorial area. However, it requires the franchisor to clarify in the COF whether and what the rules of competition exist between its own and franchised units and between franchisees.
There is also the obligation to indicate which suppliers the franchisee must hire to support or supply his franchise, a situation very present in franchise contracts linked to food, for example, where a standard is required in all stores in a chain of stores, in order to maintain the quality of products linked to the brand.