The franchise system has proven to be a great alternative for entrepreneurs who want to expand their brand quickly, without, however, spending a large investment.

According to the definition given by article 2 of Law nº 8.955/94, Business Franchise is “the system by which a franchisor grants the franchisee the right to use a brand or patent, associated with the right to exclusive or semi-exclusive distribution of products or services and, eventually, also the right to use technology for implementing and managing a business or operating system developed or owned by the franchisor, in exchange for direct or indirect remuneration, without, however, characterizing an employment relationship.”

It is certain, therefore, that, when looking for a franchise, the franchisee is looking for a consolidated and structured business, in order to acquire know how (how to do it) and brand rights. It can be said that it is the search for a shortcut to success.

As in any balanced bilateral contractual relationship, both parties obviously want 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 business experience that the franchisor took some time to build, as well as using a brand that, in itself, attracts potential customers, and it is precisely this point that gives rise to a concern to avoid unfair competition between franchisee and franchisor.

Not all franchise relationships go as planned. Sometimes, for various reasons, the parties choose to terminate the contract. In this case, there is no way to completely undo the deal, since it is not just a transfer of products, but mainly of intangible assets. One of the main measures to be taken upon termination of the contract is the de-characterization of the unit and the immediate cessation of use of the brand. However, the franchisee still holds the knowledge of the business, something that cannot be returned or terminated.

Due to this characteristic of the franchise, to protect the franchisor, it was necessary to create a contractual clause capable of preventing the franchisee from developing the same activities for a certain period, in a certain location, so that his new business is not associated with the franchisor's brand by potential customers, thus avoiding unfair competition. This is, therefore, the function of the Non-Competition Clause, also known as the Barrier Clause, and its effects can even extend to the franchisee's closest family members, in order to prevent potential fraud.

However, there are some cases in which the application of the aforementioned clause will be prevented. Although there is no legal provision regulating the matter, case law has ruled it out in cases where the breach of contract is due to the fault of the franchisor, as it is not considered reasonable to impose a burden on the injured party in favor of the guilty party.

Another hypothesis that limits the application of the non-competition clause is the fact that the franchised unit carries out an essential activity in the region, that is, provides essential services or products to consumers, exclusively or semi-exclusively. In this regard, Law 7,783/89, which provides an exhaustive list of essential activities in its article 10, may be applied by analogy.

In addition to the aforementioned hypotheses, the exercise of a uniprofessional activity, such as medicine or dentistry, is also considered as a limitation to the applicability of the clause. Since this is a constitutional right (article 5, XIII), it is not acceptable for the franchisee to be deprived of the exercise of his professional activity, even for a specific period of time. The understanding extends to those who already have the know how prior to the acquisition of the franchise and only uses the franchisor's brand, converting its flag. In both cases, it will be necessary to make a judgment weighing the rights of the franchisor and the franchisee, adapting the effects of the clause to the specific case, and may, for example, require only the complete decharacterization of the unit, thus ensuring the preservation of the rights and mutual satisfaction of the subjects of the contractual relationship.

It is important, therefore, that the franchisor be concerned with the inclusion of the non-competition clause in franchise agreements, taking into account the peculiarities of each franchisee, since contracts equivalent to adhesion contracts (unchangeable) are not suitable for such a relationship and do not always produce the expected effects.

By Barbara Oliveira