Franchising Law in Germany
There is currently no specific statute governing the establishment and running of franchise businesses in Germany. This means that German law does not provide for any 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 of the regulations for German contract law and outlines what is permissible within German contracts.
For example, it is not a set requirement that franchise agreements need to be in German, however they should be in a language understood by both parties 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. In the franchise agreement, the franchisor can outline the manner in which disputes will be resolved. Arbitration has advantages in terms of speed of resolution, 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 in other disputes, such as those over 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 with the drafting of the franchise agreement.
Drafting the Franchise Agreement
Allow our expert contract lawyers to draft your franchise’s franchise agreements. German law allows for non-negotiable franchise agreements, and standard agreements 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 considered the “employer” of the franchisees.
The franchise agreement is the legal basis of the franchise system and states the parties’s 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 arises 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 law, copyright law and trademark law. 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 with the requirements for “general terms and conditions” as they are subject to statutory laws under §§ 305-310 BGB. The terms and conditions within the franchise agreement should be clear and reasonable, as unclarity can cause difficulties in the event of future legal disputes, and reasonableness applies in situations such as the limiting of 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 an obligation to promote sales. Other important 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 clear counsel regarding what is allowed under German law and the risks involved with certain decisions. Once we have established the requirements 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.
The Advantage of Schlun & Elseven Rechtsanwälte
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. Contact us directly now by phone or by email to start a productive partnership.