Al-Mal obtained a copy of a draft law on regulating the granting of trademark franchise rights, which was referred by Parliament in its plenary session, yesterday, Monday, to a joint committee of economic affairs, industry, constitutional and legislative affairs, and submitted by Representative Ahmed Shalabi and sixty other deputies.
The version of the draft law “Regulating the Granting of Trademarks”, of which we are the only one to publish the full text, revealed that the franchise industry affects all development sectors in the country. Because it reduces the unemployment rate and provides many job opportunities, and works to encourage the local industry and create good marketing opportunities for it that enables it to compete locally and internationally, especially as it increases the volume of investments by attracting local and international investors to invest in the franchise industry, instead of saving in banks. fiduciary.
In the event that the franchisor does not practice the franchise business in Egypt by himself, the draft law stipulates that it is not permissible to grant a sub-franchise right until after the party to whom the concession is granted has actually practiced the activity for a period of at least one year.
The draft law regulating the granting of trademarks proposed stipulates the terms of the commercial concession contract, which include that the concession contract be in writing and signed by its parties, and that the contract includes what is agreed upon between the two parties, the subject matter of the concession contract, its validity period, the method of its amendment, and its geographical scope.
In addition to a consideration that the franchisor must pay to the franchisor, including the financial consideration for the concession, and any obligations on the franchisor related to the supply of any goods or services to the franchisor, and the obligations of the franchisor for obtaining the good or service from the franchisor.
The copy of the law revealed that the practical problem facing the franchise in Egypt is the widespread use of commercial concession in commercial relations, both internal and international, as it has become a contractual mechanism with a significant commercial impact and influence on the national economy, which necessitates the need for appropriate legislative and regulatory treatment. with his nature.
The draft law stated that foreign companies represent about 58% of the total brands in Egypt, compared to 42% for local brands, and therefore we find that the franchise industry in Egypt does not currently significantly affect the national economy, due to the limited spread and lack of local brands. And its inability to compete internationally or compete with foreign brands within the local market.
The most important practical problems that direct the franchise contract in Egypt today are the ambiguity of its legal nature, and the dispersion of the legal system that determines the nature of this contract and its effects on the contracting parties in terms of rights and obligations. The prevailing feature in this type of contract is that it is subject to an agreement parties, but often implying a disadvantage to the franchisor; Because it is the weakest link in negotiation and the contractual relationship, which leads to wasting the rights of the parties, especially the grantee, in addition to the absence of any legal obligation obliging the grantor to disclose to the grantee the reality of the status of his commercial activity, the pre-contractual obligation.
The following is the full text of the draft law regulating the granting of trademarks “:
The following draft law shall be submitted to the House of Representatives: Article One
Regarding the draft law regulating the granting of trademark rights in accordance with the provisions of the accompanying law.
Article Three This law shall be published in the Official Gazette and shall come into effect from the day following the date of its publication.
Chapter one
Tariffs
Article (1)
In applying the provisions of this law, the following expressions shall have the meaning indicated opposite each of them:
1- Commercial Franchise: A person called the franchisor grants the right to another person called the franchisor to practice business - the franchisee - for his own account, which is the right to exploit the trademark or trade name owned by the franchisor or licensed to use it, including offering The technical expertise and technical knowledge of the franchisor, and determining the way he operates the concession business, in return for financial or non-financial consideration that does not include the amounts paid by the franchisor for goods or services.
2- Franchisor: A person of a natural or legal capacity who grants a commercial franchise under the concession contract to another person of a natural or legal capacity called the franchisor, enabling him to use the trademark and all commercial signs and symbols affiliated with him while transferring technical knowledge and providing Technical and commercial assistance to him in return for paying the fees agreed upon in the contract.
3- Franchisee: A natural or legal person who receives the commercial franchise from the grantor under the franchise contract, and according to which he is able to use the trademark and all commercial signs and symbols of the grantor in exchange for paying fees agreed upon in the contract, and he is committed to applying technical knowledge according to Grantor's instructions, not to defraud the secrets of technical knowledge to others, and not to compete during the validity of the contract.
4- Commercial Franchise Contract: A contract between the franchisor and the franchisor, according to which the franchise is granted.
Dr. Franchise Business Format: A model showing the method of managing the franchise business specified by the franchisor, including the method of displaying the trademark associated with that business, which the franchisor must abide by.
- Control: The ability to influence the actions or decisions of another person, directly or indirectly, through any of the following cases:
A- Owning more than half of the capital of the company or establishment. Own more than half of the voting rights in the assemblies of shareholders or partners, as the case may be.
The right to appoint or elect the majority of the members of the Board of Directors or the Board of Directors - as the case may be - or the members of the executive staff of the company or establishment or the right to manage it.
7- Disclosure Document: A document that includes disclosure of the most prominent rights, duties and essential risks related to franchise opportunities. 8- The Agency: The Agency for Medium, Small and Micro Enterprises. 9- Regulations: the executive regulations. 10- Competent Ministry: Ministry of Commerce and Industry. 11- Competent Minister: Minister of Commerce and Industry.
The provisions of this law do not apply to the following:
1- Privileges granted or issued by ministerial decisions.
2- Agreements or contracts subject to Law No. 120 of 1982 regulating commercial agency business.
3- Agreements or contracts that are limited to the purchase and sale of commodities, or to the provision of services bearing a specific trademark, or to the use of a trademark or any other intellectual property rights in relation to any commodity or service.
- Contracts under which the franchisor is wholly owned by the franchisor, directly or indirectly.
5- Any other contracts or agreements specified by the regulations. a
Read also Learn about the prices of food commodities in consumer complexes and local marketsFor the third chapter, conditions for granting a commercial franchise
Article (4)
1- It is not permissible to grant a commercial concession except after actually practicing the commercial activity within the local or international market for a period of not less than one year, and that is through at least two different sales outlets.
2- If the franchisor does not practice the franchise business in Egypt himself, then the grantee who has the right to grant a sub-franchise may not grant the franchise except after he has practiced the franchise business in Egypt for a period of at least one year.
Chapter four
Requirements for registration and disclosure
Article (5) A special register for the Small, Medium and Micro Enterprises Development Agency shall be established to record commercial concession contracts, and the implementing regulations shall determine the procedures regulating registration, renewal and cancellation.
Article 6
1- The grantor of the commercial concession right must submit a copy of the disclosure document to the grantee within fourteen days at least before concluding the commercial concession contract, unless otherwise agreed in writing between the two parties, and the grantee is obligated to deliver to the grantor what proves obtaining a document Disclosure
2- The following must be observed in the disclosure document:
a- It must be written, otherwise it is void, and it must be clear and accurate. C- It should include the minimum data and information specified by the regulations
Article (7)
In the event of any material change to the disclosure document prior to signing the contract, the grantor shall notify the grantee in writing of this change within a period not exceeding fourteen days from the date of its occurrence if such change affects the commercial activity of the grantor and the rights and obligations of the grantee .
Article (8)
The grantee, its affiliates and the parties associated with it are obligated not to disclose any confidential information contained in the disclosure document or other confidential information that they obtain from the grantor before or during the implementation of the commercial concession contract, including secrets, commercial information and technical knowledge, in accordance with what is agreed upon in the Commercial concession contract.
Chapter Five
Obligations of the franchisor and franchisor
Article (9) The franchisor is committed to the following:
1- Determine the model of the franchise business system in detail, including a statement of standards and the issuance of instructions that the grantee must adhere to when practicing the franchise business, in order to enable him to operate such business. 2- Training the employees of the franchisee. 3- Providing technical, marketing and other expertise required by the nature of the franchise. 4- Providing the concessionaire - whether directly or through another - with the goods or services of the concession, throughout the validity of the concession contract, with the exception of the goods and services that the grantee has the right to purchase from others.
5- Maintaining the confidentiality of accounting and financial information and data related to the business of the franchisee.
6- Not establishing any facility that carries out an activity similar to that of the franchisee in the geographical area specified in the concession contract, or granting the right to a third party to do so, during the validity period of the contract. Article 10
The grantee of the concession is committed to the following:
Obtaining the franchisor's approval upon any change in the goods or services or the method of conducting the franchisor's business
2- To provide the franchisor with data related to the franchise business that enables him to develop a model for the franchise business system, including the financial and accounting data related to that business.
3- Enabling the franchisor or his representatives to supervise and control him in the exercise of the franchise business, provided that this does not result in the disruption of the franchisee's business or harm to him.
4 - Obtaining the approval of the franchisor when changing the place of practicing the franchise business.
Article 11
The franchisor and the grantee must fulfill their obligations stipulated in the concession contract in good faith.
Chapter Six
Franchise contract
Article (12) 1- The concession contract must be in writing and signed by its parties. 2- The concession contract must include - in addition to what is agreed upon between the two parties - the following:
A- The subject of the concession contract, its validity period, the method of its amendment and its geographical scope. Any consideration that the franchisor must pay to the franchisor, including the financial consideration for the concession, the financial consideration for training the franchisor’s staff (if any), technical support, and the mechanism for calculating any amount paid as consideration for the goods or services provided to the franchisor by the franchisor.
Also read The Rise of Tomatoes.. Prices of vegetables and fruits today, Monday 7-3-2022C – The obligations of the two parties regarding the training of the franchisor for the employees of the franchisor.
D - The franchisor's commitment to provide technical and marketing expertise and other expertise required by the nature of the granted franchise
E- The obligation of the grantee to adhere to the instructions, the method of marketing and display, and to preserve the identity of the recipient
Any obligations on the franchisor related to the supply of any goods or services to the franchisor, and the obligations of the franchisor for obtaining the commodity or service from the franchisor.
G - The rights of the grantee to use any trademark and any other intellectual property rights related to the franchise business, the obligations of both parties in the event of a violation of intellectual property rights, and the resulting compensations.
H- A mechanism for settling any dispute related to the concession contract.
i- A statement of the extent of the eligibility of the grantee of the concession to grant a sub-franchise to others, and the controls that govern his void.
j- The effects of any change in the ownership of the grantee, the franchisor, or the person controlling any of them.
Like any other item specified by the regulations.
Article 13
The regulation defines the provisions related to the advertising and marketing activities related to the franchise.
Chapter Seven
Cases of termination of the commercial concession contract Article (14)
In the case of assignment of the concession contract to a third party or a change in the person who controls the franchisor, the franchisor must obtain the approval of the franchisor. The franchisor may not object to the change of the person who controls the grantee or to the grantee’s waiver of the concession contract to a third party, or to withdraw his consent after granting it, except in the following cases:
1- If it is unlikely to own the houses, he has sufficient financial resources to enable him to implement the obligations of the grantee under the concession contract.
2- If the concessionaire is unable to fulfill the requirements of the franchisor regarding the assignment of the concession contract.
3- If the assignee does not meet the criteria set by the franchisor for granting the franchise.
4- If the assignee does not agree - in writing - to assume the obligations of the grantee under the concession contract from the date of assignment.
5- If the grantee does not pay any consideration due to him to the franchisor. 6- Any other case specified by the regulations.
Article (15)
Subject to the provisions of Article (14) of this law, the concession grantor is considered wisely approving of the grantee’s assignment of the concession contract to a third party or the change of the controlling person, if he does not respond in writing to the written request submitted to him in this regard by the grantee , as specified by the regulations
Article (16)
1- In the event that the grantee is a natural person, the concession contract expires upon the initiation of any of the liquidation procedures for him under the bankruptcy law, his death, his loss of capacity, or the emergence of a health impediment that prevents his ability to practice the concession business, and it may include a contract Privilege is legally required in cases of death, loss of capacity, or the emergence of a health impediment to another of the heirs of the grantee or to another person of his choice.
2- In the event that the concessionaire is a legal person, the concession contract expires with the issuance of a decision to voluntarily liquidate him, or upon initiating any of the liquidation procedures for him under the bankruptcy law, or with his termination, and his transformation or merger with another legal person does not result in the expiration of Franchise contract
Article (17)
In the event of a material breach by the franchisor of the disclosure or recording obligations specified by the law and the regulations, the franchisor has the right, before the expiry of one year from the date of becoming aware of the breach, or before the expiration of three years from the date of the breach, whichever is earlier, to terminate the concession contract without compensating the franchisor about it.
Article (18)
The franchisor may not terminate the concession contract before the expiry of its term without the written consent of the franchisor, unless there is a legitimate reason for the termination. The reason for termination shall be legitimate in any of the following cases:
1- If the grantee breaches his essential obligations stipulated in the concession contract, and does not remedy the breach within a period not exceeding fourteen days from the date the franchisor instructed him to do so.
Read also the price of a 50-kilo fodder check today, Tuesday 8-3-20222- If the grantee is liquidated or dissolved, or the concession business or the benefit from it is waived to its creditors, or the assets related to the concession business are disposed of to others.
3- If the grantee leaves or voluntarily stops practicing the concession business for a period of more than three months.
4- If the franchisee repeatedly fails to comply with the provisions of the concession contract or any other contract concluded with the franchisor regarding the concession despite the franchisor notifying him in writing of the performance of his obligations.
5- If the exercise of the concession by the grantee poses a threat to public health and safety.
6- If the grantee loses any of the licenses necessary to carry out his business. 7- If the grantee commits material violations that negatively affect the reputation of the concession business.
8- If the grantee committed an act of commercial fraud while practicing the concession business.
9- If the grantee infringes on the intellectual property rights of the franchisor during the validity of the concession contract.
10- Any other case stipulated in the concession contract as a legitimate reason for termination.
Chapter Eight
Renewal of the commercial concession contract
Article (19) Unless the concession contract stipulates otherwise, the grantee, if he wishes to renew the concession contract, must send a registered written letter with acknowledgment of receipt to the franchisor within a period of not less than sixty days prior to its expiry date, and the contract shall be renewed and extended for a period of Similar to the agreed period except in the following cases: 1- The franchisor and the franchisee agreed on new conditions. 2- We investigate one of the cases stipulated in Article (18) of the law. 3- Failure by the grantee to pay the consideration due under the concession contract. 4- The franchisor’s approval of the grantee to assign the concession contract and concession business before the end of the contract period to another person who meets the approved criteria for granting the concession.
Chapter Nine
compensation
Article (20)
If the franchisor has materially breached its disclosure or record-setting obligations in the law and regulations, the franchisor has the right to claim compensation for any damage incurred without terminating the concession contract.
Article (21)
1- If the franchisor requests the termination of the concession contract, or the franchisor terminates the contract in violation of the provisions of Article (17) of the law, or if the franchisor does not wish to renew the concession contract, the franchisor is obligated to buy back the tangible assets used exclusively in the concession business. Which the grantee purchased from him or from others based on his instructions, within sixty days from the date of the grantee’s request, and the repurchase shall be at a price not less than the price paid by the grantee minus the amount of depreciation of any equipment or supplies of these assets, and the amount of depreciation is calculated According to generally accepted accounting standards and previous accounting practices of the grantee.
2- Unless the concession contract stipulates otherwise, if the grantee terminates the concession contract in violation of the provisions of this law, the concessionaire may claim compensation for any damage incurred as a result.
Article (22)
1- It is not permissible to file lawsuits to claim compensation as a result of the franchisor’s termination of the concession contract in violation of the provisions of Article (18) after the lapse of three years from the date of termination of the concession contract.
2- It is not permissible to file lawsuits to claim compensation as a result of the franchisor’s or the grantee’s breach of his obligations stipulated in the law or the concession contract after the lapse of one year from the date on which the non-violating party became aware of the breach, or after the lapse of three years from the date of the occurrence of the breach, whichever is earlier.
Chapter Ten
Final Provisions
Article (23) Assignment, termination, expiration, or non-renewal of the concession agreement and concession business results in the expiration of the agreement to use any trademark or trade name associated with the concession business, and the regulations specify the procedures for this.
Article (24)
The law applicable to commercial concession contracts in Egypt is the law agreed upon by the two parties. If the contract does not include this agreement, the Egyptian law will apply.
Article (25)
It is permissible to agree to settle disputes arising from concession contracts by alternative means such as arbitration, mediation and conciliation.