Legal advisor role on franchising project

Legal advisor role on franchising project

People in the business world strive to be successful, profitable and most importantly not to go bankrupt. Nowadays, it is better idea to open a franchise rather than starting a new business. Franchising is a way of organizing a business, in which a business model has been already tested and proven to be effective in practice. Buying a franchise, not only receives a ready-made business plan, support in terms of advice, organization of supplies, but also the opportunity to work under a well-known brand that has already established itself and enjoys consumer loyalty. Also starting a new business from scratch, it is difficult to calculate the financial prospects for its development. Working on a franchise is much easier to plan future expenses and income based on the experience of other franchisees.

In order to implement a successful franchise business, the role of a legal advisor is crucial to several steps of the franchising project. It is important that legal advisor knows how to draw up a commercial agreement, license agreement in strict accordance with all existing requirements of the legislation as well as incorporation of legal entity to implement the franchising project and conduct due diligence of franchisee.

The franchising agreement is new in Mongolian practice and recognized by one of the most difficult agreement, so only an experienced and qualified specialist can lead to successful franchising project with professional support of the lawyer. This article is intended to address some of the key points of the franchising agreement, and the legal advisor role in franchising project.

There are several roles of legal advisor on Franchising:

1) Company set up

It is quite common for a franchise to be operated under a legal entity than a sole proprietorship in order to assess whether franchising project is profitable or efficient.

Mongolian legislation provides for a wide range of legal forms of commercial entities (Limited Liability Company or LLC, joint-stock company or JSC and joint venture), in practice, private businessmen and foreign investors mostly prefer with foreign invested LLC. According to the Company Law of Mongolia, a company may be established directly or by the reorganization of another legal person (merger, consolidation, division, separation, or transformation)

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For more information or any queries, please feel free to contact Bolormaa.V, Partner by or +976 70155031.

This legal information was prepared by Umguulliin GRATA International Mongolia LLP, the Mongolian office of GRATA International, an international law firm that has its branches in 20 countries around the world. The material contained in this article is provided for general information purposes only and does not contain a comprehensive analysis of each item described. Prior to undertaking (or not undertaking) any action, readers should seek professional advice specific to their situation. No liability is accepted for acts or omissions taken in reliance upon the contents of this article.