A franchise agreement (franchising) is the agreement by which an independent and independent entrepreneur (franchisee or "recipient") joins the business network of his counterparty (franchisor or "grantor"), so that he is entitled to sell goods (distribution franchising), to provide services (service franchising) or to produce products (production franchising), using the brand and the know-how, sales and advertising know-how of the franchisor[1].
For example, companies that operate with the distribution franchising system are Pizza Hut, MacDonald's, Benetton, Germanos, etc., with the service franchising system, large hotel companies, such as Hilton, Holiday Inn, etc., with the production franchising system Coca-Cola, Seven-Up, etc., while the mixed franchising system is also common in practice, as for example in the case of cosmetics companies, which distribute products while also offering beautician services[2].
With the franchising contract, the grantor provides the recipient with the "franchise package", i.e. a set of intellectual and industrial property rights, ensures the latter's inclusion in its network, allows it to use its distinguishing features, trains and supports it, while the the recipient is obliged to comply with the instructions and principles of the donor's system and not to compete with it. In return, the receiver pays the donor initially a one-time sum for joining the network ("entry fee") and then, on a periodic basis, a percentage of its collections ("royalties").
With the franchise agreement, the recipient is included in a single distribution system, which is characterized by a strong uniformity of the companies that are part of the same franchise system. This contract is a framework contract, of a mixed nature, which regulates the main obligations of the parties within the framework of the principle of freedom of contracts (Article 361 of the Civil Code) and which is not specifically regulated by law, and contains elements of several contracts, such as the lease of a profitable object (Articles 638 et seq. of the Civil Code), a contract for the provision of independent services (Articles 648 et seq. of the Civil Code) and a mandate (Articles 713 et seq. of the Civil Code). The fulfillment of the various obligations on both sides provided for in the franchise agreement often requires the conclusion of more specific executive agreements, such as e.g. sale of the necessary equipment for the operation of the specific sales store, supply of conventional goods, raw materials, etc. Both the necessity of training and the more specific content of the above executive contracts can only be determined based on the specific needs that arise in the context of the cooperation between the parties[3].
The franchise agreement includes a number of obligations for the franchisor, including:
a) granting to the recipient the right to use and exploit the "package" (industrial property rights, know-how, etc.), the content of which is sufficiently specified in the main part of the framework contract,
b) the integration of the recipient into the system by providing him with the required technical and organizational infrastructure and his corresponding training, which may be repeated periodically,
c) supplying it with raw materials
d) the continuous support of the recipient, throughout the duration of the contract, in organizational, technical, financial or other matters, the undertaking of the obligation to advertise the products of the system and the maintenance of the machinery and equipment of the recipient's shop.
On the other hand, within the framework of the above contract, the licensee or recipient, who sells the system products in his own name, for his own account and with the same business risk, usually has the following obligations: a) the payment of a lump sum ( entry fee) for the granting by the donor of the use and exploitation of know-how and industrial property rights, b) the periodic payment to the donor of a certain percentage of the sales proceeds throughout the duration of the contract (royalties), c) the active promotion of sales with the best possible utilization of personal work and other means available to the recipient, d) his contribution to joint advertising, e) his compliance with the organizational principles of the system and in particular his respect for the principle of uniformity , according to which the composition, preparation, characteristics and generally the image of both the store and the products of the system are uniform, regardless of the place or the market, in which they are made available, f) the obligation of the recipient to maintain confidentiality regarding the operating manual of the system granted to him by the donor, g) the obligation of the recipient not to have competitive products throughout the duration of the contract and to procure from the donor or from a person who will himself indicate the contractual products[4].
The contract is terminated, as long as it has been agreed for an indefinite period, at any time by notice. After the termination, the receiver is obliged to stop using the franchise package, which was granted to him by the donor, and is released, at the same time, from the obligation to pay him the agreed percentage of his collections. Finally, the possibility of proportional application of the p.d. 291/1991 on commercial agents, with regard to customer compensation, and in the case of the termination of the franchise agreement, provided, of course, the applicable conditions are met[5].
[1] Evangelos Emm. Perakis/ Nikolaos K. Rokas, General Part of Commercial Law – Securities, 2013, p. 277 – see 2651/2013 Eff. Athens- Bank of legal information law (intrasoft international).
[2] Antonia Poulakou – Efthymiatou – Compendium of Commercial Law, publications Ant. N. Sakkoula Athens-Komotini, 2008, p. 65.
[3] See EfThes2051/2010, Bank of legal information Law
[4] Dimitriou St. Kostakis, Franchising, Legal and Business Dimension, Law Library publications, 2002
[5] Evangelos Emm. Perakis/ Nikolaos K. Rokas, General Part of Commercial Law – Securities, 2013, p. 278.
Thomas Steph. Summer
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