Franchising in Slovakia

Economy

Slovakia has the world’s 58th largest economy with a GDP of EUR 95 billion according to 2008 data of International Monetary Fund.

Legislation

There is no specific franchise law in Slovakia although there are disclosure obligations, due to the statutory duty of good faith. A franchisor must disclose certain information to potential franchisees although there is no franchise registration.

Franchise Market

Franchising is not, as yet, a strong part of the Slovakia economy with few franchise systems active.

Franchise Legislation

• There is no franchise disclosure law but under general principles of civil law the franchisor has a pre-contractual duty to disclose key facts. The terms of franchise agreements in Slovakia must also comply with the doctrine of good faith and fair dealing. Section 43 of the Civil Code puts a good faith obligation on the parties to resolve anything which could possibly result in a dispute at a later stage in advance. For that reason, the parties are required to disclose certain facts before entering into a contract. In the event of misrepresentation whether intentionally or unintentionally evoked by the other party, the party in error has a right to rescind from the contract if it has relied on the false information while making the decision to enter into the agreement.
• There is no franchise registration.
• In Slovakia, a liability for damages caused by defective products must be taken into account by both parties to the franchise agreement due to the significant consequences it may have on both of them.   Liability for defective products can not be opted out in the franchise agreement. A franchisor may be held liable for a defective product if it manufactures or imports the product or as a result of the its trademarks and logos being affixed to the product.  However, in this latter case, the franchisor may be able to refute its liability by proving that the product was actually manufactured or imported by the franchisee or other third parties.
• A number of jurisdictions impose a duty of confidentiality on the franchisees, regarding information disclosed to them by the franchisor.  The Slovakian Commercial Code imposes a similar obligation.

Conclusion

A careful review of legal documentation is essential before franchises are sold in Slovakia.  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 David Bond.