By Marcos Francisco Vilas-Bôas Buzo

On December 26, 2019, President Jair Bolsonaro sanctioned Law No. 13,996/19, establishing a new legal framework for the national franchise sector. The old legislation was completely modernized and more detailed, aiming to offer greater guarantees and legal security for the parties.

The new legislation comes into force on March 27, 2020, bringing major changes to the information that must be provided in the Franchise Offering Circular (“COF”), the COF is the document made available by the franchisor that demonstrates and provides the most relevant information (commercial, business, financial, legal and marketing) for the prospective franchisee.

The changes provide greater security to franchisees, as they enable the franchisee to have a clearer and more precise view of the business, including awareness of business risks. Among the new information required in the COF, we can mention: (i) contact details of all franchisees who terminated or left the franchise in the last 24 months; (ii) the hypotheses for applying fines; and (iii) limitations, including territorial limitations, on competition between franchisees and with the franchisor itself.

On the part of the franchisor, it was expressed by law that there is no employment relationship between the franchisee and the franchisor, nor is the Consumer Protection Code applicable. Furthermore, it is also expressed that there is no employment relationship between the employees of the franchisee and the franchisor.