A few decades ago, the term “commercial concession” was not understood by domestic entrepreneurs. Currently, this procedure is actively used. So, a commercial concession is the granting by one entrepreneur to another of a set of rights to their own business, including a trademark, logo, production technology secret, copyrights and innovations. But at the same time, the copyright holder can control absolutely all aspects of business activity.
This procedure is also called franchising. With its help, the copyright holder creates a unified network of industries. At the international level, a commercial concession is classified into three main blocks:
- Manufacturing or working in the industrial sector.
- The provision of services or work in the service sector.
- Sales of goods and services.
In practice, the franchising business allows the owner to expand his enterprise as much as possible not only within one country, but also abroad. In addition, from a legal point of view , the concession agreement is considered a reasonable solution, eliminating the need to create a multidivisional network, expand the accounting department and tighten control. And the user who has received the rights has a huge advantage over all competitors, as it launches products on the market under the 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 copyright holder. The latter receives a cash reward in return. The contract may be signed for a specific period of time or be unlimited in nature. Moreover, it should clearly indicate which aspects of entrepreneurial activity the user receives rights to. The franchising system is subject to state regulation by issuing special laws and regulations.
The main feature of such an agreement is its paid nature, that is, the provision of any rights must be rewarded without fail. However, if the agreement does not specify the amount of payment, it is still considered valid. Just 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 copyright holder requires a down payment for the use of the trademark and other privileges, and subsequently the established percentage of the proceeds is deducted to him.
In addition, the contract is concluded in writing and must be certified by the signatures of the parties. An oral agreement is considered invalid and has no legal force. A commercial concession is a procedure that not only provides certain rights to participants in a transaction, but also assigns very specific responsibilities. The owner of the rights must provide the second party with all the necessary documentation with license agreements, a description of the process and so on. Throughout the duration of the contractual relationship, he is obliged at the request of the user to provide consulting services relating to 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, it is responsible for the conformity of the quality of manufactured goods to the quality of the products of the copyright holder. Therefore, when carrying out production activities, he must clearly comply with all technological requirements. He also undertakes to keep trade secrets and is responsible for the distribution of classified documents.