Franchise law in Romania

ROMANIAN FRANCHISE ASSOCIATION is an association of public utility

The Law of Franchising in Romania

A franchise in Romania is regulated by a contract, which governs the legal relationship between the parties usually of sale purchase, license, leasing, enterprise, representation contract.  Prior to 1989 there were no franchises in Romania because of ideological reasons.  After 1989 the use of franchises was slow to take hold and was governed by the Romanian Civil Code, the Romanian Commercial and the Romanian Procedural Code. The Government passed in 1997 Governmental Ordinance no 52/1997 which was to govern franchising and franchises (“Franchise Law”).  Further on 1st October 2011 the new Civil Code entered into force which amended further the relationships between the parties and the implementation of the franchise law.  The amendments introduced by the new Civil Code will only affect franchise agreements which entered into force after 1st October 2011. In all cases the Civil Code and the Commercial Code will be applied where matters are not covered in the Franchise Law.  The procedural aspects of the entering into a franchise agreement are regulated by the Franchise Law and the Romanian Civil Procedure Code. The Franchise Law has been amended only once since it entered into force.  The Franchise Law does not impose many terms and conditions on the parties and comprises only 15 articles.  It does, however, implement principles and regulations contained in the texts applicable in the European Union regarding competition policy, namely, Regulation no. 4087/1988 regarding to franchise agreements.

Franchise Law Romania

“Art. 1 – For the purposes of this Ordinance, the terms below are defined as follows:

a) Franchise is a trading system based on continuous collaboration between physical or juridical persons, financially independent, by which a person, the franchisor, grants to another person, called the beneficiary/franchisee or master franchisee, the right to exploit or develop a business, a product, a technology or service.

b) The franchisor is a merchant who:

  • Holds the rights to a trademark; the rights shall be exercised for a period at least equal to the duration of the franchise;
  • Gives the right to exploit or develop a business, a product, a technology or service;
  • Provides initial training for operating beneficiary trademark;
  • Using staff and financial resources to promote its brand, research and innovation, providing product development and viability.

c) The recipient is a trader, person or entity selected by the franchisor, adhering to the principle of homogeneity of the franchise network as defined by the franchisors.

d) Know-how is a sum of all formulas, technical definitions, documents, designs, networks, processes and other analogous items, fabrication and marketing of a product.

e) The franchise includes a set of contractual relations between a franchisor and more beneficiaries, to promote the technology, product or service and develop the production and distribution of a product or service. ”

Two. Article 2 is repealed.

Three. Heading of Chapter II to read as follows:

“CHAPTER II

Rules concerning the relations between the parties: pre and post-contractual relationships.

Heading “Section I – pre relations, relations to the post” is deleted.

Article 3 paragraph 3 – introduction – is amended to read as follows:

The franchisor is obliged to provide beneficial information”

Heading “Section II – Franchising” is deleted.

Article 6 read as follows:

Art. 6 – franchise agreement must contain the following clauses:

  • The contract;
  • Rights and obligations of the parties;
  • Financial conditions;
  • Duration of the contract;
  • Conditions change, extension and termination.

Article 8 read as follows:

Art. 8 – Franchisor shall notify the applicant in writing of any breach of contractual obligations and will allow reasonable time to remedy.”

Article 9 read as follows:

Art. 9 – Upon termination of contractual relations, relations to the post will be based on the rules of fair competition.

The franchisor may impose firm obligations to the former beneficiary, thereby protecting the confidential nature of the business and in particular the non-use know-how to a competing network.

10. Heading “Section III – exclusive contract” shall be deleted.

11. Heading “Section IV – Relations between parties from the franchise network” is deleted.

12. Article 12 reads as follows:

Art. 12 – Under contractual relations with its beneficiaries, the franchisor will build a network of franchise; it will be operated in such manner as to preserve the identity and reputation of the network guaranteed by the franchisor.

13. Article 13 read as follows:

Article 13. – Franchise  network consists of the franchisor and beneficiaries. Through organizing and developing the franchise network should contribute to improving the production and / or distribution of goods and / or services.”

14. Article 14 read as follows:

Article 14. – Advertisements for selecting beneficiaries must be unambiguous and shouldn’t contain false information.

15. Article 15 read as follows:

Article 15. – Advertising documents showing the financial results expected of a beneficiary will be objective and verifiable.

16. Article 16 is repealed.

17. Article 17 reads as follows:

“Article 17. – The franchisor selects the beneficiary who proves the required skills namely: managerial skills and financial capacity to operate the business.

Franchisor, as initiator and guarantor of the franchise network must ensure the preservation of the identity and reputation of the franchise network. ”

18. The title “Chapter IV – Penalties and offenses” shall be deleted.

19. Article 18 is repealed.

20. Heading “CHAPTER V – Final provisions” shall be deleted.

21. Articles 19 and 20 shall be repealed.

Franchise Law Romania

The concept of franchising in Romania, as in many other countries is a business concept which is spreading to business in Romania, as a result of the current economic climate, and the simple laws and regulations in this field in Romania.  The purchase of a franchise does not guarantee success, but can represent to the prospective business person a lower risk rather than a business started from scratch.  In certain circumstances there are also the possibilities of greater earnings in a shorter period of time.

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