Buying a Franchise in Russia: Commercial Concession or Licence?

An offer marketed as a ‘franchise’ may involve a commercial concession agreement, a licence agreement, a services agreement or several documents at once. For anyone entering the Russian franchise market, this distinction has practical implications: the substance of the deal determines the rights holder’s obligations, the rules for using the brand and the ways you can protect your interests. Before paying, establish not only the price of the offer, but also the legal structure you are buying into.

Which agreements are recognised under Russian law?

Russia has no standalone franchising law. However, arrangements granting a package of exclusive rights are specifically regulated by Chapter 54 of the Civil Code of the Russian Federation, which deals with commercial concessions. It is therefore incorrect to say that franchises are not regulated by law at all. The Civil Code’s general provisions on obligations and contracts also apply, as do the intellectual property rules in Part Four.

Under Article 1027 of the Civil Code, the rights holder grants the user, in return for payment, the right to use a package of exclusive rights belonging to the rights holder in the user’s business activities. The right to use a trade mark or service mark is a mandatory part of that package. Other rights may also be included, such as rights to trade secrets, or know-how.

The parties to a commercial concession agreement may be commercial organisations or registered individual entrepreneurs. The agreement must be in writing; failure to comply with this requirement renders it void. It may be concluded for a fixed term or without a specified end date.

Licence agreements are governed primarily by Part Four of the Civil Code. Their purpose is to permit the use of a particular intellectual property asset within defined limits. A trade mark licence, for example, does not in itself mean that the licensor must provide a complete system for running the outlet, train your team or support the launch.

A services agreement serves a different purpose: it sets out specific activities to be performed, such as consultancy or training. It does not, on its own, grant the right to use someone else’s trade mark.

How to establish what you are actually being offered

Start by comparing the commercial proposal with the draft agreement. Create a table with three columns: ‘what is promised’, ‘which document makes it binding’ and ‘who must deliver it’. Include the right to use the brand, access to operational materials, training and any other elements of the offer that matter to you.

Then assess the legal structure by asking four questions:

• Exactly which intellectual property assets are you allowed to use?
• What uses are permitted, and within what limits?
• Which services or materials must be provided separately?
• Who receives each payment, and what must they provide in return?

A document’s title does not determine its legal nature. If an agreement is called a ‘partnership agreement’ but amounts to a commercial concession in substance, the label alone does not prevent the relevant rules from applying. Conversely, putting ‘franchise’ on the cover does not create obligations missing from the text.

Do not assume that a licence agreement is necessarily a poor choice. It may accurately reflect the arrangement if all you need is permission to use a particular asset. Problems arise when the sales pitch promises a complete business model but the written agreement grants only limited permission to use the brand.

Ask a lawyer to review the substance of the entire package, not just the first document. It is particularly important to check the schedules: these often contain lists of rights, details of the materials to be supplied and descriptions of services, without which the main agreement is difficult to assess.

Which obligations depend on the structure of the deal?

For commercial concessions, Article 1031 of the Civil Code requires the rights holder to hand over technical and commercial documentation, provide the necessary information and instruct the user and their employees on how to exercise the rights granted. This is a statutory basis for the relationship, not merely a marketing promise.

The same article provides for ongoing technical and advisory support, including assistance with employee training, unless the agreement states otherwise. So even if you choose a commercial concession, read the exceptions carefully: some rules apply by default but can be changed by agreement between the parties.

A licensor under an ordinary licence agreement does not automatically have the full set of obligations imposed on a rights holder under a commercial concession. If you need consultancy, training or other support, check exactly where these commitments are set out and who is responsible for them.

Registration requirements also need separate attention. Under Article 1028 of the Civil Code, it is the grant of the right to use the package of exclusive rights under a commercial concession—not the agreement itself—that must be registered with Rospatent, Russia’s intellectual property authority. Without registration, the grant is deemed not to have taken effect. The grant of the right to use a trade mark under a licence must also be registered. Renaming the agreement a ‘licence’ does not avoid this requirement.

What to check if there are several documents

Splitting a deal across several agreements does not, in itself, indicate any breach of the law. However, the buyer needs to understand whether the documents form a coordinated whole or operate independently of one another.

For example, one company may grant a trade mark licence while another sells training and consultancy. If the licence cannot be put in place, the obligation to pay for training already delivered will not necessarily fall away. The consequences depend on the terms of the documents and the circumstances of the deal.

Before signing, check:

• whether the definitions of the brand, outlet format and parties involved are consistent;
• whether the timelines for granting rights and providing services are aligned;
• which schedules belong to each agreement;
• which document takes precedence if there is a conflict;
• what happens to related agreements if the main agreement is not performed or is terminated.

Ask for the necessary links between the agreements to be set out in writing. A sales manager’s assurance that ‘this is our standard package’ does not explain who is responsible for delivery or which payments will remain due if one part of the deal falls through.

Practical takeaway: focus on a clear structure of obligations, not the agreement’s title. Before you pay, every material element of the franchise should have a corresponding provision in the documents, an identified party responsible for delivering it and clear consequences for non-performance.