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 Austria’s
service-sector dominated economy. There are about 400 franchise
systems active with a total sales volume of EUR 4.5 billion.
Among Austria’s top 20 franchisors are both leading
international brands such as McDonald’s and Esprit as well as
domestic brands such as Palmers (textiles and clothing) and Hagebau
(DIY stores). As much as 12 of the top 20 franchise brands are
domestic.
Franchising in Austria 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.