Committee on Economic Affairs approves the House Bill which aims to update the Franchise Law currently in force in Brazil

On May 14, 2019, the Committee on Economic Affairs (CAE) approved House Bill (PLC) No. 219/2015 (“Bill”) which aims to update the Franchise Law currently in force (Law 8.955, of 1994).

The Bill is structured on 12 articles and, according to its proponents, aims to “update the franchise legislation in the country, after almost twenty five years of validity of Law 8.955 of 1994”. The Bill also seeks to establish broad contractual freedom between the parties. In order to end the discussions that often arise about the nature of the franchise relationship, the Bill makes clear in its proposition that the relationship between Franchisee and Franchisor is a relationship of supply rather than consumption.

Among the most significant changes of the Bill are:

  • broad contractual freedom on condition that the options are provided in the Franchise Offering Circular (“COF”);
  • establishment of rules for the adoption of the franchise system by state-owned companies, including mixed-capital companies;
  • allowing the parties, in the case of international franchises, to choose the law applicable to the contract (provided that such law occurs within the domicile of one of the contracting parties); and
  • detailing the conditions of sublease, by the franchisor to the franchisee, of the commercial premises.

According to the opinion of the CAE, the Bill “proposes several changes that combine to improve the business environment within the corporate franchise by generating legal certainty and ratifying the continuity and expansion of the sector”, which is why the opinion was for its approval. The text, with a minor amendment, has gone to the Plenary for analysis. If approved, the Bill will repeal Law 8.955, of 1994.