What is a commercial concession?

A few decades ago, domestic entrepreneurs did not understand the term "commercial concession". Currently, this procedure is actively used. Thus, a commercial concession is the granting by one entrepreneur of another set of rights to own business, including a trademark, logo, the secret of production technology, copyrights and innovations. But at the same time, the rights holder can control absolutely all aspects of business activities.

This procedure is also called franchising. With its help, the right holder creates a unified network of productions. At the international level, a commercial concession is classified into three main blocks:

1. Production or work in the industrial sector.
2. Provision of services or work in the service sector.
3. Sales of goods and services.

In practice, business "franchising" allows the owner to maximally expand his enterprise not only within the same country, but also abroad. In addition, from a legal point of view , the concession contract is considered an expedient solution, eliminating the need to create a multi-branch network, expand the accounting department and tighten control. And the user who obtained the rights has a huge advantage over all competitors, since he brings products to the market under a well-known and universally recognized logo, which greatly facilitates the process of attracting a consumer group and conducting an advertising campaign.

As noted, a bilateral agreement is concluded between the parties to the transaction, according to which the user receives a set of rights to use certain privileges belonging to the right holder. The latter in return receives a monetary reward. The contract can be signed for a specific period of time or be of an indefinite nature. And it should clearly indicate which aspects of entrepreneurial activity the user is entitled to. The franchising system is subject to state regulation by issuing special laws and regulations.

The main feature of such a contract is its paid nature, that is, the granting of any rights must be rewarded without fail. However, if the agreement does not specify the amount of payment, it is still considered valid. Simply the amount of remuneration is measured based on market prices for similar services. If we talk about the practical application of this feature, then often the rightholder requires a preliminary fee for the use of the trademark and other privileges, and then he is charged a fixed percentage of the proceeds.

In addition, the contract is concluded in writing and must be signed by the parties. The verbal agreement is considered void and has no legal force. A commercial concession is a procedure that not only grants certain rights to bargain participants, but also imposes very specific duties. The owner of the rights must provide the other party with all the necessary documentation with licensing agreements, a description of the technological process and others. Throughout the term of the contractual relations, he is obliged at the request of the user to provide consulting services concerning the intricacies of his own business.

The acquirer of rights must dispose of the privileges granted to him within the limits specified in the agreement. In addition, he is responsible for the conformity of the quality of the goods produced to the quality of the rights holder's products. Therefore, when carrying out production activities, it must strictly comply with all technological requirements. He also undertakes to keep a trade secret and is responsible for the distribution of classified documents.