Franchising in Finland
Economy
In 2008 Finland had a GDP of US$274 billion and was the 33rd
largest economy in the world by GDP (International Monetary
Fund).
Legislation
There is no specific franchise law in Finland.
Franchise Market
Franchising is considered a “relatively poorly known and
acknowledged form of business and entrepreneurship in Finland”
(Source: Franchising in Finland in 2008 (Finnish Franchising
Association (“FFA”))) However, franchising has enjoyed steady
growth at an impressive rate (15% per annum in the years 1993 to
2003 according to the FFA) and the FFA expects that growth to
continue.
It is estimated that around 250 franchises are operating in
Finland. The main sectors for franchising in Finland appear
to be retail and services. Personal services such as fitness,
beauty, home cleaning and maintenance have been particularly
popular.
Franchise Legislation
- There is no franchising specific legislation in Finland.
- There is no mandatory franchise disclosure law
in Finland but the Unfair Business Practices Act prohibits giving
false and misleading statements about a business operation which
might affect the supply of or demand for a commodity. On this
basis, franchisors should provide a clear and accurate description
of operations to franchisee to avoid the franchisee obtaining an
incorrect impression of the franchise business which could give it
the right to rescind or terminate the franchise agreement and
potentially to claim damages for the losses that it has
suffered.
- There is no franchise registration.
- Whilst there is no franchising specific employment law in
Finland, franchisees could be treated as the franchisor’s employees
for the purposes of taxation of the franchisee is not a company or
judicial person. In such circumstances the franchisor could find
itself liable for tax and national insurance
contributions.
- The Finnish Franchising Association’s Code of Ethics contains
provisions which must be considered by its members when offering
and selling franchises.
- The Contracts Act and Act on Regulating the Contract Terms
between Entrepreneurs can both have a bearing on the relationship
between franchisor and franchisee. For example, unreasonable
provisions can be amended by the court if they consider that there
was unequal bargaining power between the parties. Care also
needs to be taken to ensure that post termination restrictions are
not too onerous so as to unreasonably limit the franchisee.
- There is a general obligation on franchisor and franchisee to
deal with each other in good faith.
Conclusion
It is imperative to use a carefully crafted disclosure document
with franchisees in Finland.
As with other countries, it is essential to review carefully
proposed franchise documentation before utilising them with
franchisees in Finland.
Finland is a small and geographically distant market so having a
proper understanding of the local market will be invaluable before
embarking on franchising in Finland.
For more information please contact Babette
Marzheuser-Wood.