Franchise disclosure: what to request before committing

Russia has no mandatory franchise disclosure pack. Here is how to obtain the documents you need and assess a brand’s transparency before making a payment.

A glossy franchise presentation is no substitute for the information you need to make a purchase. In the Russian franchise market, the materials supplied to prospective partners largely depend on each brand’s own practices. Buyers should therefore set out their own disclosure process in advance: what to request, when to receive it and which gaps should prompt a pause in negotiations.

What Russian law requires

Russia has no mandatory pre-contractual franchise disclosure document with a prescribed list of information and a standard deadline for delivery to the buyer. Nor is there a specific waiting period between receiving such a pack and signing the agreement. Rules from other countries cannot automatically be applied to a Russian transaction.

However, commercial concession arrangements are specifically governed by Chapter 54 of the Civil Code of the Russian Federation. Where a business is granted a bundle of exclusive rights that includes the right to use a trade mark, the substance of the transaction must be assessed in light of these provisions. The Civil Code’s general provisions on contracts and obligations also apply, as do the intellectual property provisions in Part Four.

A commercial concession agreement must be in writing, and the grant of the right to use the bundle of exclusive rights must be registered with Rospatent, Russia’s intellectual property office. Registration does not assess the franchise’s commercial appeal or confirm the accuracy of the seller’s presentation.

The absence of a mandatory disclosure pack does not give sellers licence to mislead buyers. Article 434.1 of the Civil Code requires negotiations to be conducted in good faith. Providing incomplete or inaccurate information, including withholding circumstances that should be disclosed to the other party given the nature of the agreement, may have legal consequences. However, any dispute will turn on its facts and evidence: not every refusal to answer a question automatically amounts to a breach.

Make requests that can be answered with documents

Do not simply ask the seller to ‘send everything about the franchise’. Prepare a written list of information you need and explain which decisions it will inform. Divide your request into four sections:

Network structure: who sells the franchise, who grants the rights, who provides services and who receives payments. Ask for an explanation of the role of any related companies.
Track record of the format: when the first company-owned outlet began trading, which formats have been tested in practice and which elements of the offer are recent additions.
Network composition: a list of operating company-owned and franchisee outlets as at a specified date, along with details of openings and closures over an agreed period.
Transaction documents: drafts of all agreements and schedules, a list of mandatory operating rules, supplementary agreements and any documents referenced in the main agreement.

For each item, ask for the date to which the information relates, its source and definitions of the terms used. For example, an ‘opened outlet’ might mean a site already trading, a signed agreement or premises undergoing refurbishment. Without consistent definitions, comparisons between brands will be unreliable.

Separately, ask what information the seller will not provide and why. ‘We do not disclose franchisees’ personal data’ is different from refusing to disclose even the total number of closed outlets. In the first case, you can discuss anonymised information; in the second, significant uncertainty remains.

The law does not require a franchise seller to test the model at its own outlet before offering it to others. You therefore need to establish for yourself whether there is an operating business and how long the format has been tested, rather than assuming that the word ‘franchise’ guarantees either.

Agree the disclosure sequence before making payments

Giving a complete operations manual to an unfamiliar applicant may be unacceptable to the rights holder. A reasonable disclosure process should protect its information while allowing the buyer to make an informed decision.

Suggest access in stages. First, obtain general information about the network and a list of the transaction documents. Next, obtain draft agreements and substantive information that allows you to assess the offer. Sensitive materials can be reviewed in a secure folder, in anonymised form or at a meeting attended by an adviser. If necessary, the parties can agree separate confidentiality arrangements.

It is important to distinguish pre-purchase disclosure from performance of an agreement already signed. Article 1031 of the Civil Code requires the rights holder to supply technical and commercial documentation, provide the necessary information and give instruction. This is not the same as an obligation to give a prospective franchisee a standardised investment information pack in advance.

Ask for the agreed process for sharing materials to be recorded in writing, including the document list, deadlines, responsible people and means of access. Allow time for review after receiving the last material document. If the seller insists on payment before disclosing key terms, first establish the legal nature of that payment and the consequences of withdrawing from the transaction. Do not treat it as a risk-free formality.

Assess the quality of the answers, not the size of the folder

Keep a simple register recording each question, the answer received, the supporting document, the date and any remaining gap. Save versions of presentations and retain correspondence. After meetings, send a summary of verbal explanations to the brand’s representative for written confirmation.

Check that the materials are consistent with one another. If the presentation describes one network composition but the list of addresses suggests another, ask for the figures to be reconciled as at a single date. If the agreement refers to a mandatory schedule that is missing from the pack, record the documents as incomplete. A large number of files does not, in itself, mean transparency.

Identify the information without which you would not proceed with the purchase. For the rest, record what uncertainty you are prepared to accept. Refusing to disclose a particular document does not necessarily demonstrate bad faith, but a buyer is under no obligation to accept an unknown risk simply to keep negotiations going.

Practical takeaway: before signing or paying, agree what information will be disclosed, obtain up-to-date documents and record any unresolved gaps. A transparent information-sharing process helps you choose a partner, but it does not replace legal and commercial due diligence on the transaction itself.