Franchising in Sweden

Economy

Sweden has GDP of US$478.6bn (source: The Economist/ Country ViewsWire). 

The Swedish economy is currently in recession. The Economist predicts that the Swedish economy will begin to recover in 2010.

Legislation

There is a pre contract disclosure franchise law in Sweden and other laws are of relevance to a franchising relationship.

Franchise Market

Franchising is already an important part of the Swedish economy and is still growing.

It is estimated that franchise companies have a turnover estimated at over SEK 110 billion and employ in the region of 100,000 people. There are over 400 franchise chains active in Sweden.

The retail sector is the most popular for franchising but other sectors are popular notably consulting and hotels and restaurants.   

The majority of franchises operating in Sweden are domestic and the Swedish Post Office is the leading franchise in Sweden.

Franchise Legislation

Sweden has specific pre-contract franchise disclosure laws. Sweden has other laws which apply to franchising but there are no other specific laws regulating the relationship between the franchisor and franchisee.

• Sweden has specific franchise disclosure law (Lag (2006:484) om franchisegivares informationsskyldighet). At least 14 days before executing a franchise agreement the franchisor must disclose to the franchisee certain key facts and information. The disclosure laws prescribe the minimum information that must be disclosed.  The disclosure requirements also apply when an existing franchise agreement is, with the franchisor’s consent, transferred to a new franchisee.
• There is no franchise registration in Sweden.
• Amongst others, the Competition Act, Contract Act, Contract Terms between Entrepreneurs Act and Sales of Goods Act are likely to have a bearing on the arrangements between a franchisor and franchisee.
• There are also principles of freedom of contact and a duty to act in good faith which apply to the offer and sale of a franchise.
• Franchising with individuals rather than corporate entities poses a risk that the Swedish tax authorities will consider the franchisee to be an employee of the franchisor which could result in significant tax issues.

Conclusion

Franchising is popular in Sweden. In addition to complying with the mandatory pre-contractual disclosure laws a careful review of legal documents is advisable before franchises are sold in Sweden.

For more information please contact Babette Marzheuser-Wood.