The franchise system has proven to be a great alternative for businessmen who intend to expand their brand quickly, without depending on great investments.
According to the definition given by article 2 of Law No. 8.955/94, Corporate Franchise is “the system through which a franchisor assigns to the franchisee the right to use a trademark or patent, associated with the right of exclusive or semi-exclusive distribution of products or services and, eventually, also the right to use the technology for implementing and administering the business or operating system developed or held by the franchisor, through direct or indirect compensation, without characterizing employment bond.”
Thus, it is certain that, upon looking for a franchise, the franchisee is seeking a consolidated and structured business, so as to acquire knowhow and rights over the trademark. It can be said that it is the search for a shortcut in the path to success.
As in any balanced bilateral contractual relationship, both parties intend to gain something. On the one hand, the franchisor gains visibility and strengthening of its brand, in addition to consolidating the business in the market. On the other hand, the franchisee acquires the experience of the business the franchisor took a certain time to build, as well as it uses a brand that, per se, attracts potential clients, and it is exactly this point that brings a concern in avoiding unfair competition between franchisee and franchisor.
Not all franchise relationships go as planned. Sometimes, for several reasons, the parties choose to end the agreement. In this case, there is no way to fully undo the business, as it is not only a transfer of products, but mainly of intangible goods. One of the main measures to be taken with the end of the agreement is the defacing of the unit and the immediate interruption of the use of the brand. However, the franchisee still has the knowhow of the business, something that cannot be returned or ceased.
By reason of such characteristic of the franchise, as a protection to the franchisor, it was necessary to create a contractual section capable of precluding the franchisee from developing the same activities for a certain period, at a certain location, so that its new business is not associated with the brand of franchisor by eventual clients, thus avoiding unfair competition. This is the purpose of the Non-Compete Section, also known as Barrier Section, and its effects may even extend to the closest relatives of the franchisee, so as to avoid fraud.
However, there are some cases in which the application of the following section will not be possible. Although there is no legal provision regulating the matter, case-law has repealed it in the cases where the contractual termination happens by fault of the franchisor, because it is not deemed to be reasonable to create burden to the aggrieved party as opposed to the aggrieving party.
Another hypothesis that limits the application of the non-compete section is the fact that the franchised unit performs an essential activity in the region, that is, to supply essential services or products to the consumers, on an exclusive or semi-exclusive basis. In that case, using analogy, Law No. 7.783/89 may be applied, which provides on a restrictive list of essential activities in its article 10.
In addition to the mentioned hypotheses, the application of the section is also limited by the exercise of a single-professional activity, like medical or dental. Due to being a constitutional right (article 5, XIII), it cannot be admitted that the franchisee be deprived of exercising his professional activity, even if for a determined term. The understanding extends to that person who already has the knowhow previous to the acquisition of the franchise, and only uses the trademark of franchisor, converting its brand. In the two cases, it will be necessary to weigh the rights of the franchisor and of the franchisee, adapting the effects of the section to the case in question, and it may, for example, only be required that the unit be completely defaced, thus guaranteeing the preservation of the rights and the mutual satisfaction of the subjects of the contractual relationship. Therefore, it is important that there is a concern by the franchisor in relation to the inclusion of the non-compete section in franchise agreements, observing the peculiarities of each franchisee, provided that agreements equivalent to adhesion agreements (not subject to alterations) are not indicated for such relationship and not always produce the expected effects.
By Bárbara Oliveira