Franchise Agreements in Ukraine: The Contract the Code Regulates, and the Disclosure It Doesn’t

Contract architecture | JVS Law

Open the Civil Code of Ukraine and look for a franchise agreement. It is not there. The contract you are about to sign is called commercial concession, it lives in Chapter 76, and the omission of the international word was deliberate — the drafters of the Code preferred not to put foreign terms in it.

The two are the same thing, not two related things. But the vocabulary gap is the smaller problem. The larger one is what Chapter 76 regulates, and what it leaves entirely to you.

For twenty years a franchise arrangement in Ukraine was described twice, in two codes, in two different sets of words. Chapter 76 of the Civil Code and Chapter 36 of the Commercial Code (Articles 366–376) both defined commercial concession, and reconciling them was a standing item in every opinion written on the subject.

That is over. The Commercial Code of Ukraine lost force on 28 August 2025 under Law No. 4196-IX of 9 January 2025. One text now governs, and it is the Civil Code.

The same Law also reached into Chapter 76 itself and rewrote part three of Article 1122 — which is worth knowing about, because that provision voids clauses most franchisors consider standard. More on it below.

Four provisions do most of the work, and none of them is optional.

The subject matter (Articles 1115, 1116). One party grants the other, for a fee, the right to use a bundle of its rights: intellectual property — trade marks, industrial designs, inventions, works, trade secrets — plus commercial experience and business reputation. Notice what is doing the load-bearing. Without a registered trade mark in Ukraine there is very little bundle to grant.

The parties (Article 1117). Both sides must be business entities. A private individual who has not registered cannot be a franchisee, whatever the term sheet says.

Form (Article 1118). In writing. Not in writing means void — not voidable, not unenforceable at the other side’s option, but a nullity from the start.

And what is no longer there. Article 1118 used to require state registration of the agreement; parts two to four of it were deleted by Law No. 191-VIII of 12 February 2015, the deregulation package. Eleven years on, the belief that a Ukrainian franchise agreement has to be registered somewhere is still one of the most common things we are asked to confirm. It does not. The trade mark licence within it may need recording for its own reasons; the concession contract does not.

These are the ones that survive translation of a standard international franchise agreement into Ukrainian law without anyone noticing.

1. Price control clauses are void (Article 1122(2)). A term giving the franchisor the right to set the price of the goods or services, or to set a floor or a ceiling for it, is a nullity. Recommended-price language survives; a right to fix, or to bound, does not. This is not a competition-law risk to be assessed — the Code decides it in advance.

2. Customer and territory restrictions on selling are void (Article 1122(3)). A term under which the franchisee may sell only to a defined category of customers, or only to customers located in the contract territory, is likewise a nullity. This is the provision Law No. 4196-IX amended in 2025. Note the asymmetry the Code draws: the franchisor may be barred from appointing anyone else in the territory, and the franchisee may be barred from competing (Article 1122(1)) — but the franchisee may not be barred from selling outside it.

3. You are liable for the franchisee’s quality (Article 1123). The franchisor bears subsidiary liability on claims brought against the franchisee over the quality of goods, works or services. Where the franchisee manufactures the franchisor’s product, the liability is joint and several. No allocation of risk between the parties changes what a third-party claimant can do. The corollary is Article 1120(2)(3): the franchisor is obliged to control quality — a duty, not a right, and the answer to whether the audit clause is worth the cost.

4. Exit from an open-ended contract takes six months (Article 1126). Either party may walk away from a contract with no fixed term on not less than six months’ notice. A longer period may be agreed; a shorter one may not. And a franchisee who has performed properly has the right to renew on the same terms (Article 1124) unless a statute says otherwise — which is a materially different position from the renewal-at-discretion model most systems run on.

Sub-franchising has its own arithmetic (Article 1119): franchisee and sub-franchisee are jointly and severally liable to the franchisor, and invalidity of the head contract makes the sub-contract invalid too.

Here is the gap that matters most, and it is a gap by design rather than by oversight.

Developed franchising markets barely regulate the franchisor–franchisee contract. What they regulate is pre-contractual disclosure: the list of things a franchisor must hand over before signature — typically at least seven working days before — so that the franchisee forms a view with the facts in front of them. The franchisor’s own litigation history and that of its officers over the past five years. The last financial statements, and the movement in financial position over three years. What the franchise actually consists of, with registration numbers for the intellectual property. How many franchised and how many company-owned outlets were operating at the end of the last financial year, with the addresses of the twenty nearest to the site the franchisee is contemplating. Every payment the franchisee will make, and every person connected to the franchisor with whom it is “recommended” to do business.

Ukraine has none of this. Chapter 76 obliges the franchisor to hand over technical and commercial documentation after the contract exists (Article 1120(1)); before it exists, the Code is silent.

The obvious fix was attempted. Draft Law No. 7430 “On Franchising” was registered on 21 December 2017 — and, as the author wrote at the time, it largely re-copied Chapter 76 and added restrictions rather than introducing a disclosure regime; the Parliament’s own scientific and expert directorate recommended returning it for revision. It was withdrawn on 27 February 2018 and formally struck out on 29 August 2019. Nothing has replaced it.

The practical consequence is simple and it runs both ways. A Ukrainian franchisee has no statutory right to any of the information above, so it has to be extracted as a contractual condition. A foreign franchisor whose home disclosure document already exists has an easy way to look serious — and, more usefully, an easy way to make the franchisee’s later “I was not told” argument go away.

• Is the trade mark registered in Ukraine, in the right classes, in the right name? The bundle in Article 1116 is only as good as what sits inside it. This is the single most common defect we see, and it is discovered at the point of enforcement.
• Run the pricing and territory clauses against Article 1122. Price-fixing and customer-or-territory sales restrictions come out of a standard international template as nullities. They need rewriting, not a risk assessment.
• Price the quality liability under Article 1123. Subsidiary — or joint and several where the franchisee manufactures — and not disclaimable against third parties. That should drive the audit, training and insurance provisions.
• Decide the term deliberately. Open-ended means six months to get out and a renewal right for a compliant franchisee. A fixed term with defined renewal criteria is usually the cleaner instrument.
• Build a disclosure step even though nothing requires one. Seven working days, in writing, receipted. It costs one page in the contract and removes an entire category of future dispute.
• Choose the law and the forum on purpose. Parties may depart from the Code where it does not prohibit it (Article 6) — but Articles 1122 and 1123 are exactly where it does, and a Ukrainian court applying them will not care which law the contract chose if the franchisee is Ukrainian and the outlets are here.

This page began in August 2019 as a note pointing to the author’s Ukraine chapter on franchising in Ukrainian Law Firms 2019. A Handbook for Foreign Clients (the chapter, in English). Rewritten in August 2026 around the repeal of the Commercial Code and the current text of Chapter 76; the law is stated as at that date. The author’s assessment of Draft Law No. 7430 was published by Yurydychna Gazeta.

The author defended a dissertation on franchise agreements in 2003, wrote the Ukraine chapters for Franchise and for International Franchising (2nd ed.), and has been recognised by Who’s Who Legal in franchising. The discussion about whether Chapter 76 should have used the word “franchising” at all is one she had, at the time, with the professor responsible for drafting it.