The new Business Franchise Law, which was published in the Official Gazette on December 16, 1994 and went into effect on February 14, 1995, is the first Brazilian law to govern specifically all franchise agreements.

The new Law defines a business franchise as a relationship whereby the franchisor, in return for compensation, grants a franchisee the use of patents or trademarks, the exclusive or semi-exclusive right to distribute products or services and, where appropriate, the use of operational systems or technology for the implementation and administration of a business developed or owned by the franchisor.

Under the new Law the franchisor must send a Franchise Offering Letter to a franchisee before the franchisor is entitled to receive any payment from the franchisee under a franchise agreement. The Franchise Offering Letter must include, inter alia, the following particulars:

If the franchisor fails to submit a Franchise Offering Letter to the franchisee or includes false information in such Letter, the franchisee may seek cancellation of the franchise agreement and reimbursement of any payments made to the franchisor.

Earlier regulations, which established the criteria for recordation of franchise agreements, were promulgated principally for arrangements involving foreign franchisors and as a legal requirement to permit royalties and related payments to be remitted abroad and to be tax-deductible for the Brazilian franchisee.