Franchising in Poland
In 2013, the franchise industry in Poland grew by 9.4%, with the food service sector leading the way, and experts currently anticipate that this trend will continue. While, not surprisingly, most of the franchise concepts in Poland are home-grown, foreign franchisors, enticed by robust market conditions and a franchisor-friendly legal landscape, are more frequently setting their sights on Poland.
Franchising is not directly regulated by Polish civil law. There are no laws that regulate the content of franchise agreements - whether by mandating or by restricting the inclusion of specific terms or conditions. Generally, the parties are free to negotiate the terms of a franchise agreement. As there is no legally binding definition of a franchise agreement under Polish law, a franchise agreement is characterized as a “no name contract.” A 2005 decision by the Court of Appeal in Warsaw (dated 29.11.2005, no I ACa 1026/05), however, offers some guidance as to what constitutes a franchise agreement. In that case, the court explained that a franchise agreement, under the customs established in market practice, is a mutual contract and, under that agreement, the franchisee (partner) obtains from the franchisor (the organizer of the network) the authorization (franchise) to use the franchisor's trademarks and the franchisor's proven method of conducting an economic activity in return for payment (a franchise fee paid periodically).
Since Poland does not have any franchise-specific legislation, the general rules specified in the Polish Civil Code (PCC) apply to franchise agreements. The PCC establishes the principle of freedom of contract. Article 353 of the PCC provides that “the parties of the contract may arrange the legal relationship as they deem proper on the condition that the contents or the purpose of the contract are not contrary to the nature of the relationship, with the statutory law and with the principles of community life.” This rule is generally interpreted to mean that, if the parties to the contract give their consent, the contract is binding on them, even if it is unbalanced. While this rule is fully applicable to agreements between entrepreneurs, consumer contracts are subject to more restrictive conditions. Other general PCC rules that apply to franchise agreements relate to ways of concluding the agreement, its forms and defects in the declaration of intent (Art. 56-116of PCC), as well as provisions regarding the parties' obligations, including, in particular, performance or non-performance of obligations (Art. 353-534 of the PCC).
A franchise agreement is also considered a “mixed agreement” as certain of its contractual features derive or may derive from named agreements, such as sales agreements or license agreements. In such cases, the relevant provisions of the PCC governing those types of contracts will also apply to the franchise agreement.
In addition, in determining whether a franchise agreement complies with applicable Polish law, the following Acts should also be considered:
- Act of 30 June 2000 on Industrial Property Rights and regulations issued thereunder—relate to the use of trademarks, trademark protection and related topics.
- Act of 16 April 1993 on Combating Unfair Competition—relates to confidentiality obligations, the proper designation of the entrepreneur and its goods and difficulties for other entrepreneurs to access the market.
- Act of 4 February 1994 on Copyright and Neighboring Rights.
- Act of 16 February 2007 on Competition and Consumer Protection and Government Regulation of 30 March 2011 on block exemption of specified vertical agreements (Regulation on Block Exemption)—applicable if the contract adversely impacts competition in the Polish market. With respect to vertical restraints on the purchase, sale and resale of goods and services within a franchise arrangement, such as selective distribution, non-compete obligations or exclusive distribution, the Regulation on Block Exemption applies to a market share of 30% or more. If the contract impacts trade between European Union members or has as its object or effect the restriction of competition within the common market, the European Union's rules are directly applicable.
In Poland, no formalities or specified procedures are required for a franchise agreement to be valid. However, because of the complicated character of the obligations arising from a franchise agreement, the agreement usually is concluded in written form. Furthermore, since a franchise agreement includes a license of intellectual property rights, if that license is not covered by a separate license agreement, under the Polish Act on Industrial Property Rights, the agreement must be in writing, or it will be null and void. Either party can request that the trademark license (whether included in the franchise agreement or otherwise) be registered with the Polish Patent Office. If an exclusive license is registered with the Polish Patent Office, the franchisee may assert trademark infringement against a third party on its own without the assistance of the franchisor.
Polish law does not regulate the term of a franchise agreement—both a contract for a fixed term and a contract for an indefinite period are permitted. The main difference in regards to such agreements relates to termination. An agreement for an indefinite period of time may be terminated any time even without cause, but it should contain a provision regarding the termination period. Polish legislation does not require a minimum period of notice for the parties to terminate an indefinite duration franchise agreement. However, in practice, at least a six-month termination period is usually used. Where a contract has a stated term, the contract provisions regarding termination will govern.
Magdalena Kowalczuk-Szymańska is a partner at SWKS legal office in Warsaw, Poland. She represents many Polish and international franchise systems and regularly advises about international expansion to Poland. Robert A. Smith is a partner and chair of the Franchise Group at Wiley Rein LLP. Maureen A. O'Brien is special counsel at Wiley Rein LLP.
You may also be interested in the other articles in Wiley Rein's International Franchise Development Series, which are available here.