In the month of December 2019, the new law regulating the business franchise system, Law No. 13,996/2019, was sanctioned. This new law, which becomes effective on March 26, 2020 for new franchise agreements, fully replaces the previous law (Law no. 8,955/1994).
Among the changes brought by the new Franchise Law, there is the inclusion of new requirements for the Franchise Offering Circular - COF (document used by the franchisor to provide commercial, financial and legal information on the franchise to those interested in operating a franchise unit), with emphasis on the following (i) the need to inform if and which are the rules about territorial exclusivity between own and franchised units; (ii) detailed description of what is offered by the franchisor to the franchisee; (iii) indication of the existence, or not, of rules about transfer or succession; (iv) indication of the existence of a council or association of franchisees, also including the detailing of the competencies for management and inspection of the application of resources of existing funds; (v) indication of the rules of limitation to competition between franchisor and franchisees, and among the franchisees, as well as the detailing of the territorial scope.
Another novelty brought by the Law concerns the expansion of the types of Intellectual Property rights covered: the definition of business franchise now includes contracts involving the use of trademarks ''and other objects of intellectual property,'' thus replacing the previous text that mentioned only the use of trademarks or patents - excluding software, industrial designs, copyrights, cultivars and, potentially, a whole range of intellectual property rights.
The new law expressly provides for the possibility of using arbitration in franchise agreements, but fails to resolve the conflict over whether arbitration proceedings, which are confidential, should be considered inserted in the COF's obligation to inform the future franchisee of all existing lawsuits about the franchise.
Finally, the new Franchise Law maintains the obligation to wait ten days after signing the COF before signing the contract or pre-contract, as well as the payment of any fees by the franchisee to the franchisor. In these cases, as well as in the case of omission of information required by the Law or submission of false information in the COF, the franchise agreement may be invalidated by the franchisee.
