Franchising Trends in Belarus
Interview with Alexander Korsak, Partner and Deputy Director of ARZINGER&PARTNERS LLC, Belarus
How did you get started as a franchise consultant?
Intellectual property is one of my spheres of expertise and inter alia deals with franchising as complex contractual relations combining know-how, trademarks and other IP issues.
Franchising being quite new institution for Belarus was implemented into our law system by means of adoption of the Civil Code in 1999.
The first one franchise agreement was registered in the National Center of Intellectual Property of the Republic of Belarus only in 2006.
Simultaneously with development of market relations in Belarus franchise agreements have become one of the various options to organize business here, and my clients started to use this option. But in general, franchising is not very developed in Belarus and can be found in pure form quite rarely.
Who are your clients?
Mainly my clients are foreign companies, but representatives of major and middle Belarusian business, as well as banking and financial institutions can be also found in my portfolio. Among them are Bosch, IKEA, LEAHG, Fishman Group, Profine (KBE), Textima, Bertsch Laska, Inditex (Zara), Belarusbank, Priorbank.
As to franchise issues, e.g., as a partner at Arzinger & Partners I have participated in the process of drafting, adjusting and conclusion of franchise agreements for One Smart Star Bel (telecommunications sphere); franchise agreement for gas stations management systems (name of the client is confidential); for Blanche et Brillance (trade of dental health care remedies, the project was supervised jointly with Russian lawyers Alexandrow & Partners).
What are the current trends on the franchising market in your country?
At the current moment approximately 135 franchise agreements are considered as registered in the state register, but a lot of them have been registered by the same franchiser.
The state and private businessmen have only now started to pay more attention to possibilities of franchising as a modern institution for multiplication of business.
How many companies in your country offer franchises?
Very few. The most famous brands are “HTC”, “Totler”, “Electroservice and Co”, “Arcada Retail”, “Vianor”, “Hot Travel Tours Shop”, “Patio”.
For the most part, franchises are given by foreign companies.
Which are the best franchises by growth, branch and demand? What makes them different?
Generally, the terms of franchise agreements are confidential, and their texts can not be found in public domain.
What's the average startup investment in money and time for a franchise?
Everything is quite individual and depends on the sphere of business, repute of the brand, and results of negotiations.
But here are some examples of public offers:
Brand “Best Burger”, fast food restaurants. Lumpsum payment in amount of 15000$, royalty – 3%/a month from turnover after the second year of activity.
Family Leisure Club “Our Expedition” – family-friendly center of creativity and development. Lumpsum payment in amount of 4000-7000 Euro depending on the amount of share, royalty in amount of 200-350 Euro.
“Rozhok-Pirozhok” – streetfood, cone-type pizzas. 3% royalty /a month without lumpsum payments.
“Country Chicken” – fast food restaurants. Lumpsum payment in amount of 25000$, 3-5% royalty /a month.
Which branches experience a lack of franchises?
There is a lack of franchises in spheres of public catering (coffee houses, pizza restaurants, fast food and street food restaurants), clubs, entertainments and clothes.
What is the profile of the people who choose to buy a franchise?
Middle and small business.
What should a franchisor know before coming to your country? Any specific requirements, legal restrictions.. etc?
Belarusian legislation prescribes to register franchise agreements in special register of the National Center of Intellectual Property.
The essential terms of license complex being granted to a franchisee are: right to use the trade name, right to use confidential information, including know-how. The rights on a trademark shall be registered in Belarus prior to assignment.
There are many other nuances, that’s why we do recommend to hire business lawyers for drafting and analyzing franchise agreements (even when these agreements are governed by laws of foreign states).
