Franchising is a type of business agreement whereby one party, the franchisor, grants the right to a second party, the franchisee, to use the business methods and practices developed by the franchisor. What this involves is that the franchisee has a right to use, manufacture, sell, use trademarks and brands established by the franchisor in their own business. The franchisor bears the responsibility to provide the franchisee with a “know-how” system which explains the business practices and how should be conducted and also access to the existing business system. The new franchise that is established is an extension of the parent company and is known as a representative for the already existing brand and image. Due to the nature of franchise agreements, the franchisor retains the rights to the logos, brands and trademarks. When entering into a franchise agreement, the three main elements of such an agreement should be kept in mind and made sure that they exist:
Currently in Iran, franchising agreements are used as a popular method by foreign companies that seek to enter the Iranian market whilst still retaining control over their own brand. Franchising agreements are not subject to any special set of rules or laws in Iran. Similar to other international contracts in Iran, they are subject to general principles of contract law set out in the civil code of Iran, the Commercial Code of Iran and the franchising agreement established between the two parties. In addition to these stated laws and regulations, franchising agreements may also be subject to multiple other laws in Iran. Laws and regulation such as import and export regulations, labor laws, social security regulations, taxation, foreign national entry, resident and work permit regulations etc. Another main area of law that is applied to franchising agreement is intellectual property rights (IP rights) since franchising is a common mode of exploiting IP rights. Moreover registration with some authorities is mandatory, such as registration with the Ministry of Industry, Mine and Trade and the Ministry of health for import and distribution of foreign products as the case may be. These responsibilities are allocated to the franchisee.
The following elements are contained in a franchise agreement:
Bayan Emrooz Law Firm renders services to foreign and Iranian natural and legal entities in the field of contract law, including consulting, for setting up a franchise contract. Having an experienced and specialized legal staff, Bayan Emrooz is ready to provide the needed legal services in respect to investment and JVs, sale and purchase in accordance with Incoterms, exclusive and non-exclusive agency, distributorship, technology transfer, license, franchise, turn-key, buy-back, finance, consultancy services, service contracts, EPC, transportation and logistics, insurance, MOUs, LOIs and etc. in Iran.
Bayan Emrooz Law Firm was founded in 2008 under the registration No. 23211 in Tehran, and renders legal consultation and attorneyship services to foreign or domestic legal and natural persons. Our approach and main purpose is to expand the culture of utilizing legal consultation in civil and commercial matters in order to prevent high personal or social costs spent on resolution of disputes before judicial and non judicial authorities.