Unlike the agency relationship, the franchise is not governed by statute. Thus, no specific requirement to either of the parties to a franchise exists, save for the necessity to observe general legal principles and rules, as well as special regulations that may apply depending on the structure of the particular franchise relationship.

A franchise agreement may be regarded as a vertical agreement that is intended to prevent, restrict or distort competition on the relevant market, or may result in such prevention, restriction or distortion. Vertical agreements are generally prohibited under Bulgarian competition law (the “General Prohibition”). The Law on Protection of Competition  prohibits agreements between undertakings, decisions of connected or associated undertakings, as well as concerted practices, which have as their object or effect the prevention, restriction or distortion of competition on the relevant market through direct or indirect price fixing, market sharing or sources of supply, limitation or control of the production, trade, technical development or investments, application of dissimilar conditions to the same type of contracts in respect of certain parties, thereby placing them at a competitive disadvantage, as well as tying arrangements.

Notwithstanding the foregoing, provision is made for certain exceptions to the General Prohibition, namely the General Prohibition does not apply to vertical agreements with a negligible effect on competition. Such effect is deemed to be negligible where the combined market share of the parties to the agreement does not exceed 10% of the relevant market (if the parties are competitors) or 15% of the relevant market (if the parties are not competitors). Further, the General Prohibition does not apply to vertical agreements granted an individual exemption by the Bulgarian Competition Protection Commission and to vertical agreements between small and medium-sized enterprises which are granted an individual exemption by the commission by reason of the fact that such agreements improve the competitiveness of the enterprises concerned. The General Prohibition does not apply to vertical agreements falling within the scope of the block exemption granted by the Competition Protection Commission.

Exclusive purchasing clauses normally fall within the scope of the General Prohibition, where price fixing is not covered by the block exemption.

The application of the block exemption to a franchise agreement is subject, among others, to the following conditions having been met by the IP-related clauses in the franchise agreement. Firstly, the assignment or use of IP rights should not be the primary object of the franchise agreement but should only be ancillary thereto. The primary object of the franchise agreement should be the use, sale or resale of goods or services by the franchisee or its customers. The block exemption refers to franchise agreements as an example of exempt vertical agreements only. A franchise agreement is defined in the block exemption as an agreement under which the franchiser sells (supplies) to the franchisee goods for resale licensing at the same time the franchisee to use a patent, trademark, industrial design or know how. The second condition to be met is for the IP rights to be assigned to or used by the franchisee.

The IP license would be valid if granted by a written contract. The particular contract may provide for exclusivity as to the use of the licenses object. The use of the IP might be limited to certain goods/service only and/or to part of the territory only. The license granted as a part of the franchise scheme should be registered into the respective registry kept by the Bulgarian Patent Office as a condition for its validity thereof vis-a-vis third parties.

As no specific rules regarding the franchise agreement exist, no general restrictions to its duration apply. However, if, the franchise incorporates a lease arrangement, the provisions regarding the term of the lease will apply. Namely, under Bulgarian law a lease agreement may not be concluded for a period longer than ten years. If longer, it is reduced by operation of law to ten years.