A Preliminary Agreement in Franchising Business - Risks and Challenges

This article constitutes a Preliminary Agreement in Franchising. The research process focuses on theoretical and practical aspects of legal issues that concern franchise agreement. This article represents problematic legal issues, experience and tradition in legalizing pre-sale information disclosure plays a significant role in the franchise business. Franchisee maintenance justice mechanisms signify the importance of pre-sale information disclosure and provision principles in the initial stage of making pre-agreements. The article deals with certain controversies revealed in a franchise business caused by the absence of legal regulations at the pre-contractual stage. It emphasizes the lack of a mechanism to protect franchisees’ rights- information disclosed in the Franchise Disclosure Document. It contains recommendations on how to solve existing problems. As a result of observing different models of legal systems and regulations in the pre-contractual stage, it becomes necessary to integrate this new franchising system and pre-sale information disclosure into Georgian law. On the one hand, this study suggests implementing legislation and franchising regulations by combating several legal problems. On the other hand, the research accentuates the adopted model law on information disclosure, “UNIDRUA”, that will be a strongly recommended model contract for such a country as Georgia since it lacks a special law on franchising. The analysis based on this research can be applied by commercial organizations and entrepreneurs that run businesses in terms of franchising.