Franchise Agreements in Germany

Allow our expert contract lawyers to draft your franchise’s franchise agreements. German law allows for non-negotiable franchise agreements, and standard contracts have advantages for franchisors who wish to have the same terms and conditions for all franchisees.

However, careful legal analysis needs to be considered as if the franchise agreement is overly limiting regarding the franchisee’s freedom; there is a danger that the franchisor could be viewed as the “employer” of the franchisees.

The franchise agreement is the legal basis of the franchise system and states the parties’ rights and obligations. This franchise agreement as a contract is one of a continuing obligation (§ 314 BGB), which is a continuous contractual relationship with ongoing obligations arising between the parties. Furthermore, as a mixed contract, the franchise agreement can include elements of the purchase, rental and lease contract and a service and agency contract. These contracts concern various areas of law such as competition, copyright, and trademark. Depending on the industry and the type of franchise system, the form of the contract can vary greatly.

Such franchise agreements must be valid under German law and apply the requirements for “general terms and conditions” as they are subject to statutory regulations under §§ 305-310 BGB. The terms and conditions within the franchise agreement should be clear and reasonable, as unclarity can cause difficulties in future legal disputes, and reasonableness applies in situations such as limiting liability in different circumstances.

Franchise agreements are also subject to the principle of dealing in “good faith” (§ 242 BGB), with German courts developing individual obligations from this principle concerning franchises. For example, pre-contractual disclosure obligations and that the franchisee carries a duty to promote sales.

Other vital clauses within German franchise agreements which need to be considered include non-competition and non-solicitation clauses.

Our German lawyers will analyse your franchise agreements’ requirements and provide straightforward counsel regarding what is allowed under German law and the risks involved with certain decisions. Once we have established the needs of the franchise alongside its goals and characteristics, our expert team will appropriately draft the franchise agreements.

Allowing our team to carry out this task ensures that your franchise can continue its daily business, knowing it is on legally solid ground.

There is currently no specific statute governing the establishment and running of franchise businesses in Germany. This means that German law does not provide franchise-specific registration necessities for either party, the franchisor or the franchisee.

However, other regulations and obligations do apply in laws governing competition law, commercial law, consumer law and contract law. The German Civil Code (BGB) provides many regulations for German contract law and outlines what is permissible within German contracts.

For example, it is not a requirement that franchise agreements be in German; however, they should be in a language both parties understand for legal and practical purposes. Should disputes concerning the franchise agreement or other contracts reach the courts in Germany, the language of the courts will be German.

The franchisor can outline how disputes will be resolved in the franchise agreement. Arbitration has advantages in terms of speed of resolution, and privacy, allowing the parties to determine the rules of the procedure and the language of the proceedings. However, litigation should be considered for issuing interim injunctions in time-sensitive matters and other disputes, such as intellectual property usage.

Franchising is becoming more prevalent in Germany, such as in the food sector, the auto industry, retail and elsewhere. Founding a franchising company, whether as a franchisor or a franchisee, requires expert legal advice, particularly in determining which corporate structure to pursue.

Our franchise establishment lawyers will advise you throughout the entire process and drafting the franchise agreement.

At Schlun & Elseven Rechtsanwälte, we are a full-service law firm, and this ensures that we can provide the required legal knowledge for all issues relating to the franchise agreement.

Our firm has the required knowledge of commercial and contract law to carefully draft the contracts, alongside specialists in diverse fields such as intellectual property law, competition law, real estate law and corporate structures to ensure that your franchise agreements cover all required areas.

Additionally, our team can provide you with the necessary insight into the latest trends and best practices within certain industries in Germany. Having a reliable legal partner in Germany is particularly important for franchisors coming from abroad.

With franchise law as a relatively “young” area of German law, and as there are no set standard legal statutes concerning franchises specifically, working alongside a law firm with expertise across the board is crucial. Please, do not hesitate to contact us by our contact form, phone or email to start a productive partnership.