Franchising in Ukraine

Intellectual property law — trademark licensing, software licensing, and protection of trade secrets require separate agreements that interact with the franchise contract. Unregistered IP licenses may be unenforceable against third parties.

Competition law (AMCU) — territorial exclusivity, non-compete obligations, and vertical restraints in franchise agreements are scrutinized under Ukrainian competition law aligned with EU principles. Overly broad non-compete clauses are routinely struck down.

Currency control (NBU) — cross-border royalty payments are subject to the 180-day settlement deadline under the Law on Currency and Currency Operations (2018). Franchise fee structures must be designed to comply with NBU reporting and transfer requirements.

Tax implications — royalty payments to foreign franchisors trigger withholding tax obligations. The applicable rate depends on double tax treaty coverage, and the structure of payments (royalties vs. service fees vs. marketing contributions) affects the tax treatment.

Court and arbitration practice — Ukrainian courts routinely reduce contractual penalties under Article 551 of the Civil Code. Arbitration clauses must be drafted to be enforceable under both Ukrainian procedural law and the New York Convention.

Non-compete clauses — broad territorial and temporal non-compete provisions that are standard in US or EU franchise agreements are frequently invalidated by Ukrainian courts and the AMCU. Non-compete obligations must be narrowly tailored to survive judicial review.

Trademark registration — if the franchisor does not register its trademark in Ukraine before granting franchise rights, the franchisee or a third party may register the mark first — creating leverage and blocking enforcement options.

Penalty provisions — contractual penalties designed for common law jurisdictions are routinely reduced by 50-90% by Ukrainian courts under Article 551 of the Civil Code. Alternative liability mechanisms are needed to maintain enforcement value.

Currency control — royalty payments denominated in foreign currency are subject to NBU regulations. The 180-day settlement deadline, reporting requirements, and currency conversion rules must be built into the payment structure from the outset.

Governing law and arbitration — a franchise agreement governed by English law with ICC arbitration is not automatically enforceable in Ukraine. The arbitration clause must be drafted to survive Ukrainian procedural challenges.

Registration of the commercial concession — commercial concession agreements must be registered with the relevant state authority. An unregistered agreement remains valid between the parties but is unenforceable against third parties.

Step 1 — Franchise model assessment. We analyze the proposed franchise structure — single-unit, multi-unit, master franchise, or area development. We identify applicable Ukrainian regulations, IP registration status, and potential regulatory obstacles. Deliverable: franchise structuring memo with risk mapping.

Step 2 — IP and trademark audit. We verify trademark registrations in Ukraine, identify gaps in IP protection, and assess risks of third-party registrations. Deliverable: IP audit report with registration recommendations.

Step 3 — Franchise agreement drafting or adaptation. We draft the franchise agreement from scratch or adapt the international template to Ukrainian law — restructuring non-compete clauses, penalty provisions, governing law, arbitration, and currency control compliance. Deliverable: adapted franchise agreement.

Step 4 — Disclosure document preparation. We prepare a disclosure package aligned with UNIDROIT standards and international best practice — financial model transparency, franchisor obligations, territory definition, and exit mechanisms. Deliverable: franchise disclosure document.

Step 5 — Financial and tax structuring. We design the royalty and fee structure to comply with NBU currency control (180-day deadline), withholding tax obligations, and transfer pricing rules. Deliverable: financial structuring recommendation.

Step 6 — Digital infrastructure governance. We structure ownership and access rights for websites, domains, CRM, mobile applications, customer databases, and online sales channels. Deliverable: digital governance framework within the franchise agreement.

Step 7 — Negotiation support and launch. We represent the franchisor or franchisee in negotiations, finalize the agreement package, coordinate IP registrations, and advise on compliance during network launch. Deliverable: executed franchise documentation.