Newsletter Edition 10 - January 2020


A transparent law for franchisors and franchisees

The new Franchise Law (Law No. 13,996/19) enacted by the Presidency of the Republic on December 26th shall come into force as of March 26th this year. The new legal framework expresses important aspects, such as the prediction that there is no consumer relationship between franchisor and franchisee, and that there is no employment relationship between the employees of the franchisees and the franchisor.

 The Law also provides specific rules for the sublease of the franchisor’s commercial point to the franchisee. “The new franchise law is good and strives for transparency, including new items whose disclosure to the franchisee is mandatory through the offering circular”, comments Cândida Ribeiro Caffé (photo), co-coordinator of ABPI’s Technology Transfer and Franchising Study Committee. In fact, the law adds items to the list of information necessary for the franchise offering circular and makes it clear that the sanctions apply either for omission or the transmission of untrue information in the Franchise Offering Circular (COF).

According to Cândida Caffé, the new law pacified old controversies between the parties as to the possibility of charging rent in the sublease in an amount higher than that of the main lease, since it establishes specific rules for the sublicense of the commercial point by the franchisor to the franchisee.

The franchise system is one of the fastest-growing segments of economic activity. According to a survey by the Brazilian Franchising Association, in the second quarter of 2019, the sector had revenues of R$ 43.122 billion, an increase of 5.9% compared to the same period in 2018. Franchises had generated 1,224,987 direct jobs, which increased to 1,348,235 in the same comparative period.