Franchising has been gradually capturing the Ukrainian market. According to the Franchising Association of Ukraine, as of today about 400 franchising chains operate in the Ukrainian market and this data demonstrates annual increase of about 20 per cent. Notwithstanding the substantial Ukrainian market potential for further franchising expansion, there are lots of pitfalls hindering successful franchising development in Ukraine, for example: (i) the equivocal legislative regulation; (ii) strict foreign currency regulation; (iii) misunderstanding by the franchisees of the nature of franchising; (iv) the franchisee's unwillingness to strictly follow the franchisor's standards; (v) 'historical' disrespect for the franchisor's intellectual property rights; and (vi) commercial secrets. The absence of well-established, firm practice in the ruling and interpretation of franchising related issues by the Ukrainian courts also pours oil on the flames. In view of the above, in this article we provide a general overview of a few judgments recently rendered by the Ukrainian courts to throw light on benchmark trends of franchising development in Ukraine without focusing on analysis of the legality and substantiation of the said judgments.
To register or not
The Civil Code of Ukraine and the Commercial Code of Ukraine, two principal legislative acts regulating franchising in Ukraine, require that the franchise agreement, amendments thereto as well as termination thereof shall be subject to the state registration. The state registration shall be carried out by the body that performed state registration of the franchisor as a legal entity or as an individual, that is, entrepreneur. If the franchisor is registered abroad, the franchise agreement shall be registered by the body that performed state registration of the franchisee.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
