{"id":114286,"date":"2025-10-09T13:37:38","date_gmt":"2025-10-09T13:37:38","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=114286"},"modified":"2025-10-09T13:37:38","modified_gmt":"2025-10-09T13:37:38","slug":"israel-franchise-licensing","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/israel-franchise-licensing\/","title":{"rendered":"Israel: Franchise &amp; Licensing"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-114286","comparative_guide","type-comparative_guide","status-publish","hentry","guides-franchise-licensing","jurisdictions-israel"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Reinhold Cohn Group<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/07\/Black-red.png\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Reinhold Cohn Group<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/07\/Black-red.png\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Franchise &amp; Licensing laws and regulations applicable in Israel<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a legal definition of a franchise and, if so, what is it?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no specific legislation regulating franchises in Israel. The only definition of \u2018franchise agreement\u2019 in Israeli legislation can be found in regulations enacted under the Economic Competition Law 1988, which provide a block exemption to franchise agreements under certain circumstances. The definition in the regulations is as follows:<\/p>\n<p>&#8220;Franchise Agreement&#8221; a contract under which a franchisor grants the franchisee the right to use the franchise for the purposes of marketing certain goods or types of goods, including each of the following:<\/p>\n<p>(1) use of a uniform trade name or trademark or service mark, and uniform characteristics of the goods being sold or of the sale and execution, which are material to the marketing and sale of the goods;<\/p>\n<p>(2) transfer of knowledge from the franchisor to the franchisee which is material to the marketing and sale of the goods;<\/p>\n<p>(3) commercial or technical assistance from the franchisor to the franchisee, during the term of the agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any requirements that must be met prior to the offer and\/or sale of a franchise? If so, please describe and include any potential consequences for failing to comply.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no regulatory pre-offer requirements to the offer of sale of a franchise.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any registration requirements for franchisors and\/or franchisees? If so, please describe them and include any potential consequences for failing to comply. Is there an obligation to update existing registrations? If so, please describe.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The franchise per-se is under no obligation to be registered. Worth noting that in case the franchisee is provided with a license to use the trademarks of the franchisor- such license should be recorded in order to ensure that the use of the trademarks by the franchisee will inure to the benefit of the franchisor. Non-use by the trademark registered owner might cause the trademarks to become vulnerable to cancellation on non-use ground.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements (franchise specific or in general)? If so, please describe them (i.e. when and how must disclosure be made, is there a prescribed format, must it be in the local language, do they apply to sales to sub-franchisees) and include any potential consequences for failing to comply. Is there an obligation to update and\/or repeat disclosure (for example in the event that the parties enter into an amendment to the franchise agreement or on renewal)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no specific requirements in respect of pre-contractual disclosure in franchise transaction except under the general contract law, which requires that the parties negotiate in good faith. There is no specific requirement for updating the disclosure, except if the requirement derives from the duty of the parties to act in good faith for the duration of the agreement for example, a material change of circumstances before the execution of the franchise agreement which might affect the entire transaction. Based on case law the full disclosure duty in franchise agreements is enforced vigorously.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If the franchisee intends to use a special purpose vehicle (SPV) to operate each franchised outlet, is it sufficient to make disclosure to the SPVs\u2019 parent company or must disclosure be made to each individual SPV franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In general, the duty of disclosure lies towards any of the parties to the franchise agreement. Where multiple parties are involved, it is mandatory to act in good faith towards all parties. Given that there is no specific disclosure requirement, the representations of the franchisor may apply to SPVs which are under the same control as the parent company if the duty to act in good faith is fulfilled.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What actions can a franchisee take in the event of mis-selling by the franchisor? Would these still be available if there was a disclaimer in the franchise agreement, disclosure document or sales material?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the general contract law, the parties to an agreement are under the duty to negotiate in good faith. This duty was interpreted by the courts as requiring each of the parties to refrain from any misrepresentation which might mislead the other. A mis-selling due to misrepresentations may allow the franchisee to seek for the cancellation of the agreement and\\or sue for damages caused on the ground of breach of the good faith duties during negotiations and on the ground of negligent misrepresentation. in one known case the court allowed the termination of the agreement by the franchisee due to mis-selling despite a waiver clause.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Would it be legal to issue a franchise agreement on a non-negotiable, \u201ctake it or leave it\u201d, basis?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Such an offer will be evaluated under the requirement for good faith and common practice. Additionally, such offer might result in the conclusion that the agreement in question is a \u201cstandard agreement\u201d as such term is defined in the Standard Contract Law, 1982 (see section 35 below) and be subject to possible cancellation of the entire agreement or any part thereof which is found to be oppressive by the court.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are trademarks, know-how, trade secrets and copyright protected in your country?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Intellectual property rights are respected and protected in Israel. In order to protect trademarks, it is advisable to register same (after consulting with a local agent and defining the scope of the portfolio for best possible protection) with the ILTMO (Israeli Trademarks Office) although well-known trademarks may be defended if their owners may prove their notoriety as required under the Israeli Trademarks Ordinance and case law. It is highly advisable to address the right of the franchisee to use the trademark of the franchisor in the agreement as well as any relevant standard for such use and including the duty to cease any use (including as part of a domain name etc.) when the relationship between the parties terminates for any reason whatsoever.<\/p>\n<p>Know how is protected as far as it meets the requirements defined under the law for trade secrets. It is highly recommended to protect patentable know how under patent protection. Copyrighted works are protected under the Copyright Act, no registration is required.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any franchise specific laws governing the ongoing relationship between franchisor and franchisee? If so, please describe them, including any terms that are required to be included within the franchise agreement.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no specific laws. The relationship between the parties to a franchise agreement are regulated under the general contracts law and other applicable laws. The courts in Israel regard the relationship between the franchisor and franchisee as based on trust, thus when the parties lose trust in each other the courts tend not to enforce the continuation of the relationship and rather solve the dispute between the parties on a monetary basis.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any aspects of competition law that apply to the franchise transaction (i.e. is it permissible to prohibit online sales, insist on exclusive supply or fix retail prices)? If applicable, provide an overview of the relevant competition laws.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Economic Competition Law 1988 (known as the Antitrust Law) forbids parties from entering into restrictive arrangements which are defined as arrangements made between persons conducting business, under which at least one of the parties restricts itself in a manner which may prevent or reduce business competition between it and the other parties to the arrangement, or some of them, or between it and a person who is not a party to the arrangement. More specifically the law deems an arrangement to be restrictive in case it includes, <em>inter alia<\/em>, the following: restrictions in respect of the price demanded, offered, or paid and\\or the profit which will be derived; division of the market, in whole or in part, by business location or by the persons or types of persons with which business is to be done; the number of assets or services in the business, their quality, or type.<\/p>\n<p>Despite the above broad definition, the Israeli legislator granted an exemption to franchise agreements (under the Economic Competition Rules (block exemption for franchise agreements) (Temporary Order), 2001, in force until September 15, 2026) (\u201cFranchise Exemption\u201d) from being defined as forbidden restrictive arrangements as long as the objective of the arrangement is not to reduce or eliminate competition, and the arrangement does not include any restraints which are not necessary to fulfil its objective.<\/p>\n<p>The Franchise Exemption allows the parties to a franchise agreement to address the following aspects: (i) the franchise territory; (ii) the type and quality of product sold by the franchisee; (iii) the type of customers to whom the franchisee is allowed to sell the goods or services and the manner in which the sale should be performed including restrictions in respect of advertisement; (iv) the restricted use of the franchisor\u2019s know-how by the franchisee (v) the quantity of products the franchisee is entitled to sell; (vi) the product price; and (vii) knowledge pertaining to the franchise.<\/p>\n<p>The Franchise Exemption will not apply where: (i) the parties to the agreement are actual competitors; or (ii) a party has monopoly power in the relevant product market or in an adjacent market; or (iii) the agreement\u2019s duration is 10 years or longer, or (iv) when the agreement includes restrictive stipulations, such as: (a) restriction of the franchisor from using licensed know-how after the term of the agreement, even when the know-how is in the public domain; or (b) prevention of the franchisee from initiating judicial review of the validity of the rights in know-how transferred from the franchisor to the franchisee or other intellectual property rights; or (c) prevention of the franchisee from selling or supplying goods to consumers outside the territory defined in the agreement; and\\or (v) other restrictions that are only meant to reduce competition or are not necessary to fulfil its principal.<\/p>\n<p>The Economic Competition Law deems arrangements whose restrictions involve the right to use a patent, trademark, copyright or proprietary right as not restrictive, provided that the arrangement is made between the owner of the right and the party who receives authorisation to use the right and where the right is subject to registration by law and is registered accordingly.<\/p>\n<p>In 2023, the Israel Economic Competition Law (<em>aka<\/em> anti-trust law) was amended with the aim to regulate the issue of parallel imports in the aspect of economic competition. The main purpose of the amendment was to prevent harm to competition by way of thwarting or reducing competition from parallel imports by an authorized or licensed importer of goods given that competition on the part of parallel imports has been recognized as significant, especially in terms of price competition.<\/p>\n<p>further to the amendment the Economic Competition Law currently includes a number of prohibitions which mainly impose restrictions on the authorized importer, which are relevant to franchisees, in order to prevent him from acting in a manner which may harm parallel imports provided that these acts might harm competition in the industry in which the authorized importer operates; or acts whose main purpose is to prevent or reduce competition from parallel imports unless the direct importer has no other way (which is not likely to harm competition from parallel imports) to achieve the same legitimate business purpose that underlies the act under consideration.<\/p>\n<p>Along with the aforesaid prohibitions, the Commissioner is authorized to impose financial sanctions on violations of the above prohibitions by the authorized importer. The amendment further imposes on the Commissioner the duty to report to the economic affairs committee once a year, during the following five years, the measures taken to enforce the amendment mentioned above and the sum of financial sanctions imposed by it.<\/p>\n<p>The Israel Competition Authority oversees enforcement of the law when it is violated. The enforcement proceedings begin with an investigation, which may lead to financial sanctions or criminal charges.<\/p>\n<p>The franchise agreement should be carefully drafted to comply with the Franchise Exemption.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are in-term and post-term non-compete and non-solicitation clauses enforceable and are there any limitations on the franchisor's ability to impose and enforce them?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As detailed in Section 10 above, non-compete and non-solicitation clauses in a franchise agreement will be enforceable as long as their objective is not to reduce or eliminate competition, and they are necessary to fulfil the objective of the entire agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there an obligation (express or implied) to deal in good faith in franchise relationships?  If so, what practical effects does this have on the relationship between franchisor and franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. All contract parties, including the parties to franchise agreements, are subject to the duty of good faith during negotiations, the <em>culpa in contrahendo<\/em> principle, applied under the Contract (General Part) Law 1973. The Law does not prescribe the extent of disclosure and requires each negotiating party to act in a \u2018customary manner\u2019 and in good faith, thus leaving it to the courts to decide. The duty of good faith applies to the entire relationship between the parties and extends beyond the stage of negotiations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any employment or labour law considerations that are relevant to the franchise relationship? Is there a risk that the staff of the franchisee could be deemed to be the employees of the franchisor? What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Generally, the employees of the franchisee should not be considered as employed by the franchisor. As long as a clear separation between the franchisee and the franchisor is kept under the franchise agreement and de facto, the risk that the franchisee\u2019s employees will be considered as the franchisor\u2019s employees is rather low. A franchise agreement should include a specific indemnification clause to reduce the franchisor\u2019s risk of being liable for any payments to the franchisee\u2019s employees.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a risk that a franchisee could be deemed to be the commercial agent of the franchisor? What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Commercial agent is defined under the Agency Contract Law (Commercial Agent and Principal), 2012 as: Someone engaged in finding clients, or in activities (of which the purpose is to) for the purpose of entering into a contract between a client and a principal in connection with the purchase of goods that are marketed by the principal. Thus, as long as the franchisee is purchasing the goods from the franchisor (or from anyone connected to it) there is no risk of the franchisee meeting the requirements set by the law in order to be considered as commercial agent.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any laws and regulations that affect the nature and payment of royalties to a foreign franchisor and\/or how much interest can be charged? Are there any requirements for payments in connection with the franchise agreement to be made in the local currency?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no specific law affecting the nature and payment of royalties to foreign franchisor except banking regulations relating to anti-laundry activities. As to the interest \u2013 the laws regulating interest rates are applicable to loans (granted by banks or non-banks entities) rather than commercial credit line, however under the general contract laws the court might interfere in such matter should it consider the rate to be extremely unreasonable amounting to bad faith. There are no legal requirements for payments to be made in local currency.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to impose contractual penalties on franchisees for breaches of restrictive covenants etc.? If so, what requirements must be met in order for such penalties to be enforceable?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>It is possible to impose contractual penalties for breach of agreements as far as such penalties are reasonable and the enforcement thereof is not unjust. In case of monetary penalties these are subject to the power of the court to reduce them if it finds that the compensation was determined without any reasonable relation to the damage that could have been foreseen at the time of the conclusion of the contract as a probable result of the breach.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What tax considerations are relevant to franchisors and franchisees? Are franchise royalties subject to withholding tax?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Incorporated businesses are subject to regular income tax (corporate tax) imposed on taxable transactions. Certain transactions trigger payment of VAT.<\/p>\n<p>As of 2018, Israel is party to over 50 double tax treaties, essentially following the OECD model. A foreign resident entity may be exempt from corporate tax to the extent that its activities do not constitute a permanent establishment under an applicable tax treaty. There is no detailed legislation or Israeli court decision that provides a clear test under which it is possible to determine whether a non-resident has a taxable presence under Israeli tax law; thus, where there is no tax treaty protection, a non-resident is subject to tax on income accrued or derived in Israel.<\/p>\n<p>Tax is calculated based on the actual income of the business entity or person from its activity in Israel. Income tax is paid on an annual basis and may be subject to payments on account. VAT, when applicable, is paid on a monthly or bimonthly basis, depending on the scope of the transactions.<\/p>\n<p>The Supreme Court held that payment of royalties or management fees by the franchisee to the franchisor will be considered as part of the purchase price of the goods and taken into account in calculating the custom fees due by the franchisee when those payments are a precondition to the purchase of the goods by the franchisee from the franchisor. This decision may affect the financial negotiations between franchisors and franchisees.<\/p>\n<p>As long as the royalties are not tax free the payment thereof is subject to withholding tax.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is e-commerce regulated and does this have any specific implications on the relationship between franchisor and franchisee?  For example, can franchisees be prohibited or restricted in any way from using e-commerce in their franchise businesses?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no specific legislation regulating e-commerce in Israel except consumer protection law and regulations which allow the cancellation of remote sale transactions with no need to provide any ground, obligating the seller to full refund (subject to up to 5% withholding sum under certain circumstances).<\/p>\n<p>The restriction of the franchisee from using e-commerce is possible as long as it serves the purpose of the relationship between the parties.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the applicable data protection laws and do they have any specific implications for the franchisor\/franchisee relationship?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Privacy Protection Law and the regulations thereunder are applicable to franchises. No specific legislation exists therefor. Following are some of the Israeli privacy laws provisions applying on database owners (not exhaustive): (i) database owner is required to register its database if such database is, inter alia, used for direct marketing purposes (this requirement will change starting August 2025 \u2013 see hereinafter); (ii) direct marketing emails sent to Israeli subjects must include the following details: (1) the registration number of the database and the fact that the email is sent as direct marketing; (2) a notice informing the subject that he has the right to be erased from the database along with an address at which he can make this request; (3) the identity and the address of the database owner and the sources from which he received the data; (iii) database owner is required to apply the provisions of the Privacy Protection Regulations (Data Security) 5777-2017, which provide detailed duties such as maintaining an appropriate level of security on the database, and preparing and maintaining records, processes, and documentation regarding the database. (iv) database owner is required to enable data subjects to review their personal data and allow the amendment thereof if it is incorrect.<\/p>\n<p>It is to be noted that the Israeli Protection of Privacy Law applies to entities owning a database in Israel, and there is no explicit exclusion of companies established outside Israel.<\/p>\n<p>It is highly recommended to assess the degree of care required for any specific database (such as clients database) in order to arrange for the adequate protection in advance.<\/p>\n<p>Lastly it is important to note that the Privacy Protection Law was recently amendment. The amendment is applicable since August 2025. It is therefore advisable to consult with a privacy law expert in order to make sure that any operation in Israel is consistent with the law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the franchisor permitted to restrict the transfer of (a) the franchisee's rights and obligations under the franchise agreement or (b) the ownership interests in the franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a franchisee have a right to request a renewal on expiration of the initial term? In what circumstances can a franchisor refuse to renew a franchise agreement? If the franchise agreement is not renewed or it if it terminates or expires, is the franchisee entitled to compensation? If so, under what circumstances and how is the compensation payment calculated?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No such right under applicable laws.<\/p>\n<p>N\/A<\/p>\n<p>No, unless it was terminated in circumstances which entitle the franchisee to receive compensation. In circumstances where the agreement is entered into for an indefinite period of time it is assumed, under Israeli case law, that such an agreement is not perpetual thus each of the parties may terminate it subject to the provision of a prior termination notice. The notice period may be agreed upon in the agreement. In the lack of agreement as to the length of the notice period such period should be \u201creasonable\u201d and allow the other party to take measures and arrangements for a new business relationship. Under current case law the reasonableness of the period will be determined based on several criteria such as: (i) the term of the relationship between the parties; (ii) the investments made by the franchisee in order to introduce the franchisor\u2019s product into the local market; (iii) the time required in order to recoup investments made by the other party in order to enter into and operate the franchise (iv) the nature of the franchisee\u2019s business namely does its business rely only on the franchise or not.<\/p>\n<p>In case no proper notice of termination is submitted the other party is entitled to be compensated by the terminating party. The compensation is usually calculated based on the profits deprived from the other party during the period considered as \u201creasonable\u201d under the specific circumstances. In a few cases the courts adopted the compensation scheme under the Israeli Agency Contract Law (Commercial Agent and Supplier), 2012 stipulating that a commercial agent\u2019s entitlement to prior notice is calculated based on the term of the agency up to the maximum of six months notice. Nevertheless, in extreme circumstances the court found the entitlement to be of twelve months.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any mandatory termination rights which may override any contractual termination rights? Is there a minimum notice period that the parties must adhere to?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No mandatory termination rights.<\/p>\n<p>The notice period is not regulated under specific legislation and is determined on a case by case based on various parameters as detailed above.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any intangible assets in the franchisee\u2019s business which the franchisee can claim ownership of on expiry or termination, e.g. customer data, local goodwill, etc.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The ownership of intangible assets created during the franchise relationship should be addressed in the agreement between the parties. As to the goodwill in the local market, Israeli courts ruled that the goodwill of the products inure to the benefit of their manufacturer rather than the importer or distributor, nevertheless it is highly recommended to add a stipulation in the agreement in this regard. In that context it is important to note that in case the franchisee is granted with a license to use the franchisor\u2019s registered trademarks it is important to record such license with the Trademark Office as explained in Section 3 above.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a national franchising association? Is membership required? If not, is membership commercially advisable? What are the additional obligations of the national franchising association?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No.<\/p>\n<p>No.<\/p>\n<p>N\/A<\/p>\n<p>N\/A<\/p>\n<p>The Israel Franchise Promotion Centre, established in 2001, is a voluntary centre that promotes franchising in Israel. All members of the organisation are subject to an ethics code that aims to ensure the ethical management of franchise businesses. There is no membership requirement.<\/p>\n<p>A few more institutes promote franchising and provide services in respect of franchising such as the Israel Franchise Institute.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are foreign franchisors treated differently to domestic franchisors? Does national law\/regulation impose any debt\/equity restrictions? Are there any restrictions on the capital structure of a company incorporated in your country with a foreign parent (thin capitalisation rules)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No.<\/p>\n<p>No.<\/p>\n<p>No such restrictions in respect of distributorship however where the tax authorities are involved a foreign owned company will be required to provide contact details in Israel.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement be governed by local law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. as a general rule the courts in Israel respect foreign governing law clauses in agreements to which at least one of the parties is foreign, however the foreign law should be then proved, usually through an opinion prepared by an expert to the foreign law, as any other factual argument.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What dispute resolution procedures are available to franchisors and franchisees? Are there any advantages to out of court procedures such as arbitration, in particular if the franchise agreement is subject to a foreign governing law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Any form of dispute resolution is available such as court claims, arbitration, mediation.<\/p>\n<p>Not necessarily.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement and disclosure documents be in the local language?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Not necessarily however if the agreement is in a foreign language, it must be clear that the local party is well acquainted with such language for the sake of avoiding arguments based on any misunderstanding of the language of the agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to sign the franchise agreement using an electronic signature (rather than a wet ink signature)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do you foresee any significant commercial or legal developments that might impact on franchise relationships over the next year or so?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no material change in the laws and regulations applicable to franchises in Israel except the upcoming change in the Privacy Protection Law which is not specific to franchise agreement. There is currently no legislative activity which aims to regulate the franchise relationship in Israel. The change of the Commercial Competition Law and the obvious trend of the courts to encourage the free competition in the market might have some effect on franchises however once an agreement is drafted in accordance with the restrictions currently introduced to the law the franchise should not be harmed.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">4492<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/114286","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=114286"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}