Franchise agreements in Russia: commercial concession or licence?

The owner of an established business decides to expand through a franchise network: partners will open their own outlets, use the brand and replicate a proven model. How should the relationship be structured — through a commercial concession agreement, a licence or several agreements? The choice depends not on the document’s title or the size of the fee, but on the rights and obligations the parties actually acquire. Here is how to identify the right structure before drafting the agreement.

1. Describe the deal without using the word ‘franchise’

Start by listing what the partner will receive. ‘A ready-made business under a recognised brand’ may work in an initial conversation, but it does not explain the legal substance of the deal. Divide the offering into three groups:

• Rights: use of the trade mark, software, legally protected materials and know-how protected as a trade secret.
• Services provided by the franchisor: setting up the accounting system, advice, launch support and provision of documentation.
• Physical assets: equipment, furniture and opening stock.

For each item, specify the intended use. For example, the partner will display the trade mark on signage and packaging, use the software on workplace computers and gain access to restricted technical materials.

Next, check who holds the relevant rights. If the accounting software comes from a third-party developer, the franchisor’s own subscription does not necessarily allow it to give independent partners access. The partner may need a separate agreement with the developer, or the franchisor may need permission to grant sublicences.

The outcome of this stage should be a table with the columns ‘asset — rights holder — permitted use — document’. This helps identify legal gaps before they find their way into the commercial proposal.

2. When a commercial concession agreement is appropriate

Russia has no separate federal law on franchising, but commercial concession relationships are specifically governed by Chapter 54 of the Civil Code of the Russian Federation. Intellectual property rules are also set out in Part Four of the Civil Code. It would therefore be wrong to regard the Russian franchise sector as lacking specific legal regulation.

Under Article 1027 of the Civil Code, the rights holder grants the user, in return for a fee, the right to use a bundle of exclusive rights in their business activities. The right to use a trade mark or service mark is a mandatory component. The bundle may include rights to other assets specified in the agreement, such as know-how protected as a trade secret.

This structure suits a situation in which the partner does more than display someone else’s logo: they replicate a business using a bundle of rights, the rights holder’s commercial experience and its business reputation. For example, they might open a café under a shared brand and use the legally protected processes and materials supplied to them.

The parties to the agreement may be commercial organisations or registered individual entrepreneurs. The agreement may be for a fixed term or have no specified end date. However, the ability to use particular assets depends on the corresponding exclusive rights remaining in force.

Do not try to label every file as intellectual property. An ordinary expenses spreadsheet or publicly available instructions do not become protected know-how simply because they are included in an annex.

3. When a licence is sufficient

A licence agreement under Article 1235 of the Civil Code allows the grant of a right to use a specific intellectual property asset or identifying sign, such as a trade mark, within defined limits. It is appropriate where the deal genuinely concerns only those rights, rather than the transfer of a complete operating model.

For example, a manufacturer may authorise another business owner to produce certain goods under its trade mark. The licensee organises production and sales independently, and the rights holder does not provide a bundle of rights enabling the licensee to replicate its own business. Trade mark licences are also subject to the specific rules in Article 1489 of the Civil Code, including requirements concerning product quality.

The agreement must identify the asset and the permitted ways of using it. For a paid licence, it is important to agree the fee or the method for calculating it. A general statement such as ‘permission to use the brand’ does not describe the deal precisely enough.

A licence is not a universal shortcut for simplifying a franchise arrangement. If the actual relationship amounts to a commercial concession, merely calling the document a ‘licence agreement’ does not prevent the rules on commercial concessions from applying. Its legal classification depends on the substance of the obligations.

4. How to document additional obligations

The grant of rights is often accompanied by equipment supplies, advice and other services. Article 421 of the Civil Code permits mixed agreements containing elements of different contractual structures. A set of separate agreements is also possible, provided their terms are consistent with one another.

The practical issue is not the number of documents, but the clarity of the obligations. For each additional service or supply, specify:

• exactly what must be done or supplied;
• who is responsible for delivery;
• the deadline;
• which document will confirm completion or delivery;
• whether the cost is included in the overall fee or charged separately.

For example, permission to use software and its initial configuration are separate obligations. Obtaining lawful access does not prove that configuration is complete. If everything is combined under the phrase ‘provision of a business package’, the parties will find it harder to establish why a launch has been delayed and which obligations remain unfulfilled.

5. Check the structure before signing

Give your lawyer not only the draft agreement, but also the asset table, a description of the offering and a list of what the team will actually do. Ask them to check that the promises made to the partner match the chosen contractual structure.

Check the requirements for form and registration separately. Under Article 1028 of the Civil Code, a commercial concession agreement must be in writing; failure to comply makes it void. The grant of the right to use the bundle of exclusive rights must be registered with Rospatent, Russia’s intellectual property office. Without registration, the grant is deemed not to have taken effect — this is not the same as the signed agreement automatically being invalid.

The grant of a right to use a trade mark under a licence also requires state registration. Replacing a commercial concession agreement with a licence therefore does not avoid this obligation. The documents should specify who will arrange the necessary steps and how their completion relates to the start of brand use.

Practical takeaway: first describe the rights being granted and the actual obligations, then choose the agreement. A commercial concession agreement covers the use of a bundle of rights to replicate a business; a licence covers the use of specific intellectual property assets. The document’s title should reflect the deal, not disguise it.