Daniela Brito Lee Plave, CFEDaniela Brito Lee Plave, CFE

Nike Inc. Plave Koch PLC

IntroductionIntroduction

Wh “f hi l ” bWhere can “franchise laws” be found around the world?

Franchise Laws Around the WorldBlue = Disclosure LawGreen = Relationship Law Red = Disclosure & Relationship Laws Black = Other

Franchise Laws Around the World

The Americas

Barbados

Asia

ChinaJapanMacau

Europe

Within the EU

Non‐EU

BarbadosBrazilCanadaAlbertaOntarioP.E.I.

Mexicol i

South Pacific

MacauSouth KoreaTaiwanVietnam

BelgiumEstonia FranceLithuaniaItalySpain

AlbaniaBelarusCroatiaGeorgiaMoldova Romania

USAFederalStates

Venezuela

Central  Asia

KazakhstanKyrgyzstan

The Middle

AustraliaIndonesiaPhilippines Malaysia

Does Not Include:

• Codes of conduct that do not provide for governmental or private enforcement, even if (e.g., South Africa) issued under gov’t authority.

SpainSweden

RomaniaRussiaUkraine

The Middle East

Saudi  Arabia

• Bodies of law (e.g., competition, intellectual property) that also cover franchising (e.g., Québec).

© 2008 Plave Koch PLC (PK7697)

Threshold IssuesWhat is a “franchise” in the local market?

Use of the franchisor’s marks

Assistance / provides know‐how / controls over marketing, operation, or product mix (especially if the product mix is skewed toward franchisor‐dictated)

Payments But is there a “BFWP” exclusion?

Threshold IssuesWhat kind of “franchise” laws apply in the country?

Disclosure only

Disclosure + registration/filing

Relationship laws

Quasi‐disclosure (e.g., Québec)

Other critical concerns:

Commercial agency laws – e.g., GCC countries 

Threshold IssuesSpecial disclosure issues

Must the franchisor update the disclosure if the parties negotiate changes to the agreement?

Must disclosure be prepared in local language?

Practical terms?

Required by law?

Threshold IssuesIntellectual Property

Line up trademark rights and registrations so that they can be licensed properly

Get ahead of trademark pirates

Domain name issues

ExamplesChinaStrategy for preparationStrategy for preparation

Tactics for filing

Vietnam

AustraliaAustralia

Before Entering the Market:gSelect a Model

Master franchising

Direct franchising through an areaDirect franchising through an area developer

Direct franchising – unit by unitg y

Before Entering the Market:gSelect a developer/franchisee 

Operational Ability

Experience Executive Team

Financial Backing

Non‐Compete Issues Financing Considerations

Passion for the Business

Non Compete Issues Financing Considerations

Proven record of accomplishment Intangibles

Is the Prospect’s Vision Compatible with the Franchisor’s Model?

Has prospect been a master before? Will prospect likely deviate from model?

Before Entering the Market:gLegal compliance issuesProving concept – e.g., Belgium, France

Law of franchisee’s countryLaw of franchisee s countryDisclosure

Registration filingRegistration ‐ filing

Does U.S. law apply to transaction?FTC Rule – clear exemption

But … will state franchise laws apply ?

Post‐Sale Compliance IssuesOngoing disclosure obligations – e.g., Australia, China 

Translation

Who owns © in translation ?

Who pays ?

Currency conversion

Repatriation of funds

Repatriation of profits p pon product sales

Post‐Sale Compliance IssuesTax issues

double taxation treaties

use revenues earned offshore to pay for offshore expenses?

Tax receipts and payments to foreign governments

Proof

Audit deductions from royalty t t lpayments vs. actual 

tax payment records

Post‐Sale Compliance IssuesSupport personnel (e.g., for a US entity )

Offshore hiresFind

Hire

Structure – will you need to have a local entity?Structure – will you need to have a local entity?

Impact of employment lawlocal

US law

Supervision

Tax implications – may create a taxable “presence”

Post‐Sale Compliance IssuesStructuring ‐ Dispute resolution

Arbitration NY Convention, in general

Andean Pact, GCC Nations

C id f h t tConsider use of home country courtsAccess to courts

TransparencyTransparency

Corruption issues

Reliable enforcement of judgments (e.g., China)

Speed (e.g., India)

Post‐Sale Compliance IssuesStructuring ‐ Dispute resolution

Mediation

Formal

Informal Choice of law

Venue – “doctrine of mutual inconvenience”

Post‐term enforcementConfidentiality

Covenant against competition

Post‐Sale Compliance IssuesSecurity

Offshore letter of credit

GuaranteesCompliance techniques

Retain ownership of signage – lend them for term of the franchise agreement, take them back upon termination or expirationtermination or expiration

Avoid vicarious liability issues with respect to employeeswith respect to employees

with respect to customers

with respect to vendors

Post‐Sale Compliance IssuesInternational web policy

FCPA and international analogues

Anti‐terrorism laws

Privacy laws

Moving information back and forth 

EU special rules

Customer data

Franchisee employee data

Questions and Answers

obrigado(a)! 谢谢 köszönöm grazie i l d kobrigado(a)! 谢谢 köszönöm grazie vielen dank 

gratia arigatoarigato dziynkujadziynkujamercimerci kamsagratia arigatoarigato dziynkujadziynkujamercimerci kamsahamaida ahsante ¡Gracias! spasiba mamnoon

D i l B it L PlDaniela BritoNike, Inc.daniela brito@nike com

Lee PlavePlave Koch PLClplave@plavekoch comdaniela.brito@nike.com lplave@plavekoch.com