Brazil publishes New Franchise Law
On December 27, 2019 it was published in Brazil Law No. 13,966 (“New Franchise Law”), replacing the previous franchise legislation (Law No. 8,955/94).
In a nutshell, more than establishing a new legal framework for franchises, the new regulation main purposes are to clarify omissions or aspects that were not completely regulated in the previous law, as well as reflect and consolidate the caselaw understandings regarding the matter.
Among the main amendments, we highlight the following:
a) Creation of new requirements that must be complied with in the preparation of the Franchise Disclosure Document (Circular de Oferta de Franquia) (“COF”), including the obligation to have it drafted in Portuguese, definition of the territorial competition rules among franchisor and franchisees units and detailing of the territorial coverage, information about minimum purchase quotas by the franchisees from the franchisor or approved suppliers, among others;
b) Express indication of the absence of labor relationship between the franchisee’s employees and the franchisor, even during the training period, and that the relationship between franchisor and franchisee is not qualified as a consumer relationship;
c) Inclusion of rules applicable to the sublease of commercial premises by the franchisor to the franchisee; and
d) Establishment of specific rules regarding international franchise agreements, including the obligation to have it translated to Portuguese by a sworn translator (if prepared in a foreign language); express confirmation of the possibility of election of arbitration to settle disputes, as well as the possibility of election jurisdiction between the countries of residence of the parties; obligation of the parties to maintain a representative resident in Brazil if the parties adopt a foreign jurisdiction; among others.
The New Franchise Law will enter into force within 90 days counted as of its publication (March 27, 2020), period that the franchise chains operating in Brazil will have to adapt to the changes introduced by the new legislation.
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