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Franchise in 30 jurisdictions worldwide 2014 Contributing editor: Philip F Zeidman

Published by Getting the Deal Through in association with: Adams & Adams Advocare Law Office Anderson Mo¯ri & Tomotsune Ashurst LLP AZB & Partners Bengzon Negre Untalan Attorneys Bersay & Associés DBB De Grave De Mönnink Spliet Advocaten DLA Piper LLP (US) DLA Piper (Thailand) Limited Dr Sylvia Freygner, LLM Rechtsanwältin Ella Cheong (Hong Kong & Beijing) Field Fisher Waterhouse LLP Gonzalez Calvillo SC Koyuncuoglu & Koksal Lapointe Rosenstein Marchand Melançon LLP Makarim & Taira S Mason Sier Turnbull Meyerlustenberger Lachenal Noerr LLP Noerr sro Plesner Law Firm Rödl & Partner Stewart Germann Law Office Tilleke & Gibbins Triana, Uribe & Michelsen TSMP Law Wong Jin Nee & Teo Yust Law Firm contents

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Franchise 2014 Introduction Philip F Zeidman DLA Piper LLP (US) 3

Contributing editor Philip Colman and John Sier Mason Sier Turnbull 5 Philip F Zeidman DLA Piper LLP (US) Austria Sylvia Freygner and Philipp von Schrader Dr Sylvia Freygner, LLM Rechtsanwältin 13

Publisher Belgium Pierre Demolin, Véronique Demolin, Benoit Simpelaere and Leonard Hawkes DBB 20 Gideon Roberton Canada Bruno Floriani and Marvin Liebman Lapointe Rosenstein Marchand Melançon LLP 25 Business development managers Alan Lee Colombia Juan Carlos Uribe and Juliana Barrios Triana, Uribe & Michelsen 34 George Ingledew Dan White Czech Republic Barbara Kusak and Halka Pavlíková Noerr sro 40

Account manager Denmark Jacob Ørskov Rasmussen, Gitte Holtsø and Anna Gentzschein Plesner Law Firm 48 Megan Friedman Finland Patrick Lindgren Advocare Law Office 55 Trainee account managers Cady Atkinson France Emmanuel Schulte Bersay & Associés 62 Joseph Rush Dominique Destrée Germany Karsten Metzlaff and Tom Billing Noerr LLP 69 Emma Chowdhury Hong Kong Ella Cheong Ella Cheong (Hong Kong & Beijing) 76 Media coordinator Parween Bains India Abhijit Joshi, Kunal Doshi and Rishika Harish AZB & Partners 81

Administrative coordinator Indonesia Galinar R Kartakusuma and Reagan Roy Teguh Makarim & Taira S 87 Sophie Hickey Italy Roberto Pera and Filippo Maria Catenacci Rödl & Partner 95 Trainee research coordinator Robin Synnot Japan Etsuko Hara Anderson Mo¯ri & Tomotsune 103

Marketing manager (subscriptions) Malaysia Jin Nee Wong Wong Jin Nee & Teo 109 Rachel Nurse [email protected] Mexico Jorge Mondragon Gonzalez Calvillo SC 116

Head of editorial production Netherlands Tessa de Mönnink De Grave De Mönnink Spliet Advocaten 123 Adam Myers New Zealand Stewart Germann Stewart Germann Law Office 130 Production coordinator Lydia Gerges Philippines Ferdinand M Negre and Jasmine L Solivas-Dayacap Bengzon Negre Untalan Intellectual Property Attorneys 135 Senior production editor Jonathan Cowie Russia Evgeny Zhilin, Anna Kotova-Smolenskaya and Denis Shumskiy Yust Law Firm 141 Subeditor Rhonda Hare and Alison Tonges Ashurst LLP Claire Ancell Stefanie Yuen Thio and Dayne Ho TSMP Law Corporation 146 Director Callum Campbell South Africa Eugene Honey Adams & Adams 152 Switzerland Martin Ammann and Christophe Rapin Meyerlustenberger Lachenal 159 Managing director Richard Davey Thailand Chanvitaya Suvarnapunya and Pattama Jarupunphol DLA Piper (Thailand) Limited 166 Turkey Hikmet Koyuncuoglu and Seza Ceren Aktas Koyuncuoglu & Koksal Law Firm 172 Franchise 2014 Published by Ukraine Mansur Pour Rafsendjani and Volodymyr Yakubovskyy Noerr LLP 178 Law Business Research Ltd 87 Lancaster Road , W11 1QQ, UK Chris Wormald and David Bond Field Fisher Waterhouse LLP 184 Tel: +44 20 7908 1188 Fax: +44 20 7229 6910 United States Michael G Brennan and Philip F Zeidman DLA Piper LLP (US) 190 © Law Business Research Ltd 2013 Vietnam Thom Thi Mai Nguyen and Huong Thi Thanh Nguyen Tilleke & Gibbins 200 No photocopying: copyright licences do not apply. First published 2006 8th edition ISSN 1752-3338

The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a –client relationship. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of August 2013, be advised that this is a developing area.

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Law Business Research DLA Piper LLP (US) Introduction

The president of the company just left a message for you...

Philip F Zeidman DLA Piper LLP (US)

You are in-house counsel for Worldwide Franchise Corporation favour of one structural approach over others? – which, despite its name, has only franchised in its own country. You know you will be turning to outside counsel, local or oth- You’ve handled its legal needs, including the legal aspects of its erwise or both, but first you want to feel some level of comfort with domestic franchising operations, relying principally on yourself and the subject matter. A crash course on franchising in all the countries your small staff. You have occasionally called upon The Good Local he’s identified would be useful, but not realistic even if one were Law Firm, which has some franchising expertise. available. You recall a series on Doing Business in… , covering all When you arrive in the office Monday morning, a telephone those countries and more, published by one of the international message from the president is already awaiting you. accounting firms, but you would have to go through separate vol- ‘Bob, I’ve spent a lot of time over the weekend thinking about umes; and, you now remember, much of the coverage relates to taxa- our expansion. We still have plenty of territory to fill in this country, tion, and there is nothing on franchising. The Martindale-Hubbell but I can see the day coming when we will be nearing saturation. Law Digests are more manageable logistically, but give you nothing ‘If we want to maintain our growth, it’s pretty clear that the of any depth on the subjects of your interest. time has to come to look internationally. Some of our competitors Your CCH Business Franchise Guide reprints a number of fran- already are, and others certainly will soon. That’s exciting, but obvi- chise statutes in other countries. But there is understandably little on ously also more than a little intimidating. case law or implementing , and very little commentary. ‘I think our initial country targets should be [A, B, C and D], And, as it turns out, most of the countries targeted by the president with the next wave probably to be [E, F, G, H and I]. But that’s just do not have franchise-specific statutes. based on my general knowledge, and what I’ve read. You recall having seen, or seeing a reference to, some surveys of ‘I’ll take responsibility for the ultimate selections, of course, but franchise laws in other jurisdictions, both statutes and case law. You I need your input on the legal considerations – both as to where and locate a couple of them on a shelf in your office, and see that they when and as to the structure. My guess is that we will go with an are regional, apparently produced as a series of papers for a confer- area development approach; but in [C, F, and I] it may be appropri- ence on franchising in , or in Latin America. Here is another, ate to consider sub-franchising. As I’m sure you would expect, I purporting to cover more countries; but it’s out of date, and the want to do this as rapidly and as economically as possible. treatment is both inconsistent among the countries, and much too ‘Call me.’ perfunctory for your needs. (And now, in the spirit of candour, let us acknowledge that the What you need, you realise, is a treatment that covers franchise message may have been more along the lines of: statutes, if they exist, both of the ‘disclosure’ and the ‘relationship’ ‘I got an e-mail from some guy who’s ready to pay a boatload of types; implementing regulations; the principal statutes of a non-fran- money for the rights to X. I’ve never heard of X, but work up some chise nature but which will have a bearing on the transaction; key papers this afternoon.’ court decisions; and some practical guidance on the legal require- But I digress.) ments to enter into the contemplated transaction. You want all that What do you do now? If the Good Local Law Firm has any in a standardised format, so that you can draw distinctions and experience in international franchising, you may want to call your determine the availability of economies of scale. And you want it in principal contact there. But unless that experience is both broad and a sufficiently distilled and focused form that you won’t need to read deep, you know that you are highly unlikely to be able to tap into a treatise to find the few passages of direct relevance. knowledge covering all the countries in which the president is inter- You listen again to the president’s final words: ested, and what you will hear will be largely anecdotal. You recall ‘Call me.’ that there are some publications that rank in jurisdictions around the world on their experience and reputation in a range of *** disciplines – and, indeed, that two of them, The International Who’s Who of Business Lawyers and Chambers, have a component on Welcome to Getting The Deal Through, and especially to Franchise. franchising. In content and in format it’s been designed to meet the needs you But you know the president expects more of you than just to have just identified. serve as a source of referrals to other lawyers. After all, that’s why he hired you. And, in any event, it runs against your nature just to There are two ways to use this volume and its complementary turn a new and interesting matter over to an outside lawyer, not to website www.gettingthedealthrough.com: speak of the likely cost (a subject always high on the president’s list The traditional technique might be thought of as ‘vertical’. As of priorities). to Country A, for example, you can simply read how the questions At a minimum, then, you are going to want to learn something have been answered by a lawyer from that country who specialises about the questions he’s posed: Where can we safely and profitably in franchise law. You’ll find that the questions proceed roughly in franchise? Are there considerations that will dictate targeting A the order you are likely to have posed yourself. And you’ll see that before C, or postponing G? And are there arguments militating in the answers seek to pinpoint what you need to know; where to learn www.gettingthedealthrough.com 3 Introduction DLA Piper LLP (US) more; and for what purposes you will most need outside counsel. • I am especially concerned about confidentiality, because of the By the time you’ve read the chapters on Countries B, C, and D, structure of my system. In how many of these countries should I you will have a pretty clear idea of whether there are any ‘show- anticipate problems? And how might that affect even our initial stopper’ countries. And, short of those, you will have identified trou- contacts? See question 35. ble spots that may dictate deferring consideration of one or more • What about the terms of the agreement? If I am going to be countries until some threshold issues can be explored. constrained in that regard in a number of countries, that may But there is another, and less conventional approach, which have a bearing on such decisions as the initial fee, the royalties might be thought of as ‘horizontal’. This is especially useful to the and a range of other matters. See question 39. in-house counsel whose company executives – like your president • This is a new ball game for us. We need to know how to extricate – are considering a programme of entry into a number of countries ourselves if we’ve selected the wrong candidates, and we need to and want to structure a plan that will not need to be redone ‘from know what the ground rules will be as to termination in the scratch’ in the case of each country. event of default. See questions 20 and 28. Consider how you can utilise this approach to make decisions, • What could be just as threatening to us as difficulty in terminating which would otherwise need to be revisited in the case of each would be a requirement of unending renewals, which amounts country: to imposing a relationship in perpetuity. See questions 28 and • What structure will be most readily acceptable? 30. • Which provisions of my franchise agreement will most frequently • And what law will govern? If only lipservice will be paid to the raise issues of concern? notion of the parties selecting the governing law, it’s better to • How shall I organise and administer our franchise programme know that at the outset. See question 39. to minimise compliance problems? Make no mistake about it. This slender volume will not make you an Let’s look at some specific examples of the questions you will be expert in the ‘law of franchising’ in A or B. And it will certainly not asking yourself, and how this book and www.gettingthedealthrough. make you authoritative on the many other disciplines that will have com can guide you to the answers: a bearing on your franchise programme. What it can do, however, • Perhaps my deal can be structured so it will not be a ‘franchise’ is to distil from otherwise inaccessible or indigestible masses of at all. That will certainly be a help in those countries with material what you would need to know about the interface between franchise-specific laws. If there is a recurring pattern in the franchising and, for example, the choice of business form (see definitions within the franchise statutes in a number of countries, question 3); the system (5); trademark law (7); and competition that might well dictate reconsidering how to structure the fees, law (40). for example. See question 9. You may – ultimately you almost certainly will – need to consult • Even if it is a ‘franchise’, are there any exclusions or exceptions with local counsel and tax counsel as well as your principal franchise that can avoid coverage in A? Even better, is there a recurring counsel. And, you may well conclude that, with respect to any par- pattern across countries, so that I should consider it in structuring ticular country, the author of the chapter in this book is the logical the programme? See question 12. point of contact. But, armed with the material provided here, you • What are the language requirements? If virtually every country will be able to do so in a far more informed, disciplined and cost- will require use of its own language, I might as well know that effective manner. now. See question 38. Now, Bob, it’s time to return that call.

4 Getting the Deal Through – Franchise 2014 ®

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Franchise 2014 ISSN 1752-3338