Franchising in Germany
Economy
Germany has the world’s fourth largest economy with a GDP
of EUR 2,429.0 billion.
Legislation
There is no specific franchise law in Germany. However,
franchisees do enjoy a relatively high degree of protection.
Franchise Market
Franchising is a strong and growing part of the German
economy. There are more than 800 franchise systems active in
Germany comprising a total of 50,000 units.
Among Germany’s top 20 franchisors are both leading
international brands such as McDonalds and Burger King and domestic
brands such as OBI (DIY stores) and Schülerhilfe (tuition).
Franchising in Germany is boosted by the availability of
government funded start-up finance to small businesses.
Franchise Legislation
Germany is a civil law country. It has a large number of
statutes that are applicable to franchising.
- There is no franchise disclosure law in Germany but under
general principles of civil law the franchisor has a
pre-contractual duty to disclose key facts
- There is no franchise registration
- There is a cooling off period applicable to most franchise
agreements and cooling off notice must be given by franchisors to
franchisees
- Franchise agreements are considered to be standard terms of
business of the franchisor to which the German Unfair Contract
Terms Act applies. This means that the courts have the power
to strike out unreasonable contract clauses
- Germany has agency laws that apply to franchising. Under these
agency laws franchisees can claim compensation upon termination of
the franchise calculated by reference to the value of their
customer base.
Conclusion
A careful review of legal documentation is essential before
franchises are sold in Germany. In addition to compliance
with mandatory laws a good understanding of local business practice
is key to local success. An appropriately customised disclosure
document would also be appropriate.
For more information please contact Babette
Marzheuser-Wood.