On December 27, 2019, the New Franchise Law was published (Law No. 13.966 / 19). The new legal framework will come into force on 03/27/2020, replacing Law no. 8,955 / 94. The new legislation includes new minimum content that must be included in the Franchise Offer Circular (“COF”), changes art. 4th, which deals with the consequences for the non-delivery of the COF, starts to deal with the sublease of the franchisor to the franchisee and international franchise agreement. In this newsletter, we highlight the main changes brought about by the new legal diploma.
The Franchise Offer Circular, as of the new law’s effectiveness, must contain (in addition to the information already required by Law No. 8,955 / 94) the following content:
Complete list of all franchisees, sub-franchisees who have disconnected from the network in the last 24 (twenty-four) months, with their names, addresses and telephone numbers (Law No. 8,955 / 94 required only the last twelve months);
If there are and what are the territorial competition rules between owned and franchised units;
Forecasting how technological innovations will be incorporated into the franchise;
Details regarding the layout and architectural standards of the franchisee’s facilities, clarifying whether or not the franchisor will be responsible for the physical arrangement of equipment and instruments, descriptive memorial, composition and sketch;
Complete characterization about the trademark registration processes and other intellectual property rights, with registration number or protocolized order, with the class and subclass;
Indication of the existence or not of transfer or succession rules and what they are;
Indication of the situations in which penalties, fines or indemnities and respective values are established, established in the franchise agreement;
Information on the existence of minimum purchase quotas by the franchisee from the franchisor, or third parties designated by him, and on the possibility and conditions for refusing the products or services required by the franchisor;
Indication of the existence of a council or association of franchisees, with the attributions, powers and representation mechanisms before the franchisor;
Indication of the rules to limit competition between franchisor and franchisees, and among franchisees during the term of the franchise agreement;
Precise specification of the contractual term and renewal conditions, if any.
The deadline for the delivery of the COF is maintained at least 10 days prior to the signing of the franchise or pre-contract or the receipt of amounts by the franchisor or person indicated by it.
The sole paragraph of art. 4 starts to stipulate that the non-delivery of the COF on time may give rise to nullity or annulment of the franchise contract, with refund of amounts paid as a membership fee or royalties, monetarily corrected. In Law 8,955 / 94, this provision provided that failure to comply with the obligation to deliver the COF within the time period would – in a much more technical manner – result in the contract being void. In our understanding, the use of the terms “annulability and nullity”, in the new text, may generate doctrinal and jurisprudential discussions.
Art. 5, of the New Legal Framework, deals with the hypothesis that the franchisor subleases a commercial point to the franchisee and establishes active legitimacy so that both the franchisor and the franchisee can enter with a renewal action. The provision expressly admits that the value of the sublease may be higher than the lease price paid by the franchisor to the owner of the property, provided that there is a contractual provision and that the economic and financial balance is maintained.
Art. 9º, §1º, conceptualizes the international franchise contract as being “the one that, by the acts concerning its conclusion or execution, or even the situation of the parties regarding its nationality or domicile, or the location of its object, has links with more than one legal system ”.
International contracts may opt for the jurisdiction of any of the countries in which one of the contractors is domiciled. These contracts may be originally written in Portuguese or translated (sworn translation) into Portuguese at the franchisor’s expense.