What is a Franchise Agreement?

According to Article 607 of the Civil Code:

A franchise agreement is a long-term contractual relationship, under which independent enterprises mutually undertake, as necessary, to promote the production, distribution of goods, and provision of services through the performance of specific obligations.

Definition of a franchise agreement

The franchise agreement is one of the most popular, dynamic, and developing types of contracts.

To better understand its content, it is preferable to highlight the main characteristics based on the norm:

• The parties to a franchise agreement are the franchisor and the franchisee (as a rule, more than one);

• The parties are organizationally independent enterprises participating with their own responsibility. Rights and obligations arise mutually for the parties, i.e., a franchise agreement cannot be concluded between an enterprise and its own branch;

• The franchise agreement is characterized by long-term operation. Based on its content and the objectives set by the parties, it cannot be of short duration;

• The parties to the agreement have specific objectives and rights-obligations. Their main goal is the effective production and distribution of goods, as well as the provision of services;