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Advising a US beverages producer on a franchise agreement with a local company

Saturday, 11 May 2019

Kosta Legal has successfully advised a world-renowned US non-alcoholic beverages producer on entering into franchise agreements with an Uzbek company engaged in the same activities.

An extensive legal due diligence investigation was conducted to assess the capability of the local company to perform the agreements and to adhere to high standards of production and marketing set by the US counterparty. Initial advice on the transaction has also been given with a detailed memorandum on the peculiarities of Uzbek franchising and distribution agreements regulations having been provided.

It is noteworthy that beverage production is subject to rigorous regulatory control in Uzbekistan with a number of special health, safety and sanitary permits being required. It was a challenge to check all activities of the franchisee and discover any incompliance with the industry specific regulation.

Likewise, as Uzbek franchise regulations remain patchy and the relevant state regulators (tasked with, among other things, registering franchise agreements) are rather inexperienced in the relevant field, it is somewhat unpredictable how the relevant rules will be interpreted and much caution is needed in structuring franchising relations.

Our client was an American multinational beverage corporation headquartered in New York. The company's products are distributed across more than 200 countries, with annual net revenues exceeding USD 40 billion.