Franchising in the Czech Republic
Economy
Czech Republic has the world’s 40th largest economy with a GDP
of EUR 217 billion according to 2008 data of the Int’l Monetary
Fund.
Legislation
There is no specific franchise law in Czech Republic.
There are no disclosure obligations and no franchise-related
registration requirement.
Franchise Market
Franchising is a strong and growing part of the Czech Republic
economy. There are more than [90] franchise systems active in
Czech Republic comprising several hundred units.
Among Czech Republic’s top 20 franchisors are both leading
international brands such as McDonald’s and KFC and domestic brands
such as Bata and Kofola.
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
- there is no franchise registration
- in the Czech Republic the doctrine of good faith means that a
contractual obligation is enforceable only to the extent that it
does not conflict with “principles of fair dealing”. Given the
lack of precedence in franchise matters, judges have wide
discretion in defining whether or not a term is fair
- a number of jurisdictions impose a duty of confidentiality
on the franchisees, regarding information disclosed to them by the
franchisor. In the Czech Republic all information disclosed is
protected by the Civil Code.
Conclusion
A careful review of legal documentation is essential before
franchises are sold in Czech Republic. 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.