Franchisee licences and permits: what franchisors need to prepare

When preparing a franchise offering, it is easy to set out service standards and premises design while overlooking the legal basis on which an outlet provides its services. Your own company already has the necessary documentation; a new partner may not. Responsible franchising requires a clear distinction between the right to trade under a brand and the right to carry out a particular activity. Here is how an established business owner can prepare a regulatory requirements map for future franchisees in Russia.

1. Separate brand rights from authorisation to operate

In Russia, commercial concession arrangements are governed by Chapter 54 of the Russian Civil Code, while intellectual property rights are governed by Part Four. A commercial concession agreement grants the right to use a package of exclusive rights, including rights to a trade mark or service mark. Under Article 1028 of the Civil Code, the agreement must be in writing, and the grant of the right to use those rights must be registered with Rospatent, Russia’s intellectual property office.

However, this registration does not replace a licence to provide medical or educational services where one is required. Nor does it confirm that the premises meet mandatory requirements. The right to use a brand and authorisation to carry out a regulated activity are separate legal matters.

The general licensing framework is set out in Federal Law No. 99-FZ, ‘On Licensing Certain Types of Activity’. Some activities are subject to specific rules and separate legislation: for example, trade in alcoholic products is regulated by Federal Law No. 171-FZ. There is therefore no universal set of permits that applies to every franchise.

Your company’s licence does not automatically cover a partner’s separate limited liability company (OOO) or registered individual entrepreneur business (IP). Do not promise prospective franchisees that they can ‘operate under our licence’ if their own business will actually be providing the services. Have the legal structure checked before including such a promise in your franchise offer.

2. Map the regulatory requirements for the specific format

Start with a complete list of the future franchisee’s activities, rather than the documents held by your own outlet. What exactly will they sell, produce or provide? Who will enter into the contract with the customer? Where will the work take place? Different answers can lead to different requirements, even within the same brand.

For example, an educational venture cannot be assessed solely on the basis that it calls itself a ‘children’s club’. What matters is the actual nature of its activities and any statutory exemptions from licensing. For a medical business, relevant factors include the procedures and services it intends to provide, its premises, equipment and staff qualifications. Assess the specific operating model rather than assuming that the requirements are the same as those for a nearby outlet.

For each mandatory requirement, record:

• Legal basis: the relevant legislation or regulation and the circumstances in which the requirement applies.
• Applicant: the person or entity that must obtain the licence, submit a notification or complete another procedure.
• Scope: whether the requirement relates to the organisation, address, equipment or an individual employee.
• Evidence: the information, register entries or documents to be checked before operations begin.
• Dependencies: what must be in place first — premises, equipment, staff or contracts.

Do not describe every procedure as a permit. Notifying the authorities that operations are starting, obtaining a licence and complying with mandatory requirements have different legal implications. Trying to obtain a non-existent ‘permit to open’ is just as pointless as overlooking a procedure that is genuinely compulsory.

The map should show when it was last checked and who is responsible for keeping it up to date. It is a working tool, not a permanent appendix that can simply be copied once from your own experience.

3. Allocate responsibilities and costs before signing the agreement

Regulatory preparations affect launch timescales and investment requirements. If the requirements only become clear after premises have been leased, the partner may discover that the chosen property cannot be used without substantial alterations. Explain any applicable restrictions while you are still discussing the outlet format.

Divide the tasks in the agreement and its schedules into three groups. The first covers the franchisee’s responsibilities as an independent business operator: submitting applications, entering into the necessary contracts and ensuring that its operations comply with the rules. The second covers the franchisor’s support: lists of requirements, technical specifications and checks that application materials are complete. The third covers work by external specialists, where needed.

Define the deliverable for each task. Saying ‘we help with licensing’ does not explain whether that support includes advice, preparation of the application or assistance in responding to issues raised by the licensing authority. Specify separately which services are charged in addition to the initial franchise fee and who pays to remedy any non-compliance.

Do not guarantee a public authority’s decision or a fixed processing time. Instead, set deadlines for each party’s actions and a procedure for notifying the other party of delays. Also agree in advance what happens if an application is refused: whether the range of services can be changed, the opening postponed or preparations stopped, and how payment for work already completed will be calculated.

Allocating tasks contractually does not override statutory obligations. If the law places an obligation on the franchisee, the franchisor’s promise to ‘take care of everything’ does not, in itself, release the partner from that obligation.

4. Check the legal basis for operating before launch and after changes

Before opening, do more than check that there is a file labelled ‘licence’. Where an official register exists, cross-check the licence holder, licence status, addresses and authorised activities or services. Record the date and outcome of the check in the partner’s internal record.

The franchisor’s internal approval to open does not replace an official procedure. Establish a clear rule: no activity may begin until any mandatory authorisation has been obtained. If a partial launch is planned, separately check that the reduced range of services is lawful and that advertising accurately reflects what the outlet can provide.

After opening, arrange for further checks if the outlet relocates, changes its legal entity, expands its services or makes other significant changes. The partner must understand whom to notify and when, both about these events and about the suspension or termination of any necessary authorisations.

Practical takeaway: before selling a franchise, prepare a regulatory requirements map for one specific format. Set out the mandatory procedures, responsible parties, costs and evidence of readiness. This will help you avoid presenting brand rights as permission to operate a business — and prevent costly revisions to the project after a lease has been signed.