Franchise licences and permits: checks before you buy

Buying a franchise does not mean that your new outlet automatically benefits from all the licences and permits held by the franchisor. In Russia, common brand standards sit alongside each business owner's separate legal responsibilities. Before making any payment, you therefore need to establish which documents your individual entrepreneur business (IP) or limited liability company (OOO) will need, who will obtain them and whether you can open before the procedures are complete.

1. Separate brand rights from permission to operate

The main legal framework for granting a package of franchise rights in Russia is a commercial concession, governed by Chapter 54 of the Russian Civil Code. Under Article 1028, the agreement must be in writing, and the grant of the right to use the package of exclusive rights must be registered with Rospatent, Russia's intellectual property authority. Without registration, the grant of those rights is deemed not to have taken effect.

However, registration with Rospatent concerns intellectual property rights. It does not confirm that the premises meet mandatory requirements, that staff have the necessary qualifications or that the business is entitled to carry out an activity requiring a licence.

Licensing for many activities is governed by Federal Law No. 99-FZ, ‘On Licensing Certain Types of Activities’. Specific rules apply to some sectors: for example, trade in alcoholic products is governed by Federal Law No. 171-FZ. The requirements depend on the activities actually carried out, not on how the seller describes the franchise in a presentation.

A franchisor's licence does not become the franchisee's licence under a commercial concession agreement. If a separate legal entity or individual entrepreneur operates the business, you must check the requirements applicable to that operator. Do not confuse a licence to use a trade mark with a government-issued operating licence: they are different legal instruments.

Before buying, ask the seller to explain the outlet's legal operating model: who contracts with customers, takes payments, provides services and is responsible for delivery. If these functions are split between several companies, check the licensing and permit requirements for each one separately.

2. Map out the mandatory procedures

Start with a detailed description of the planned operation, rather than asking, ‘What permits does your network need?’ For a medical centre, the range of services matters; for an education business, the nature of its activities and the status of those delivering them; for a shop, the product range. Requirements may differ between formats even within the same brand.

Ask the franchisor for a list of procedures for your chosen format and region. Then verify it with a specialist lawyer and against official information from the relevant authorities. The practical outcome should be a table with the following columns:

• specific activity or service;
• mandatory licence, notification or other requirement;
• person or entity responsible for meeting the requirement;
• requirements for premises, equipment and staff;
• documents, preparation time and evidence of completion;
• responsibility for handling the process and paying the costs.

Do not focus solely on licences. Some activities require notification that operations are starting; separate sanitary and fire safety requirements, as well as rules for handling particular goods, may also apply. There is no universal ‘franchise opening permit’ that replaces all these procedures.

Ask to see an anonymised set of documents from a comparable operating outlet. This is a useful example, but it does not prove that the same documents will be sufficient for your location. Check that the requirements are current, apply to your format and account for any local rules, such as restrictions on alcohol sales.

3. Check that compliance is feasible before investing

The next question is not just how much the process will cost, but whether it is feasible with your proposed business set-up. Restrictions may concern the legal form of the business, staff qualifications, the equipment required and the characteristics of the premises. An attractive design proposal does not, in itself, demonstrate compliance with mandatory requirements.

Before incurring non-refundable costs, identify the conditions without which you cannot launch. For example, establish who will check whether the premises are suitable for the intended activity, which documents the property owner must provide and whether alterations will be needed. Do not treat approval of the premises by a franchise network manager as a substitute for proper legal due diligence.

Your budget should include not only government fees, where applicable, but also associated costs:

• document preparation and specialist advice;
• mandatory testing or surveys, where required;
• bringing the premises and equipment into compliance;
• recruiting staff with the necessary qualifications;
• rent and other unavoidable expenses before you can lawfully start trading.

Set out the sequence of steps: which documents can be prepared in parallel, and which can only be prepared after refurbishment, recruitment or equipment installation. Do not mistake the authority's application processing period for the total time needed to get the outlet ready. Remedying shortcomings and gathering supporting documents also take time.

4. Put responsibilities and the consequences of delays in writing

A statement that ‘the franchisor helps obtain permits’ is too vague. List specific deliverables in the agreement or a schedule: reviewing the list of services, preparing documents, advising on queries raised by the authority and assisting with the application submission. Specify deadlines, fees and the limits of the service provider's liability.

Set out the franchisee's duties separately: providing accurate information, recruiting staff, equipping the premises, and signing and submitting documents. Engaging a consultant does not remove the applicant's statutory obligations towards the authorities. Nor can the franchisor guarantee approval by a government authority regardless of whether the requirements have been met.

Agree on the consequences of delays arising for different reasons. If the seller provides required documentation late, this should not automatically put the buyer in breach of the opening deadline. Discuss extensions to contractual deadlines, deferral of the start of relevant payments, procedures for remedying shortcomings and what each party must do if a licence is refused. These arrangements must be expressly documented: a promise to support the launch does not create them on its own.

Do not accept a proposal to start an activity requiring a licence ‘while the paperwork is being reviewed’. Submitting an application does not, in itself, entitle you to operate without the necessary licence.

Practical takeaway: before buying, obtain a verified map of mandatory procedures, a preparation budget and a written allocation of responsibilities. It is safer to pay for a franchise once you understand not only how to fit out the outlet to the brand's standards, but also the legal basis on which it will be able to serve customers.