GRP Rainer Rechtsanwälte: Reviewing franchise agreements

Published 20 March 2017

The key arrangements between franchisees and franchisors are set out in the franchise agreement. For this reason, both parties ought to closely scrutinize this document.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Various different fields of law play a role when it comes to franchise law. It is equally important to take into account statutory provisions from commercial law as it is to consider aspects of competition law, antitrust law and employment law. It is therefore advisable to obtain comprehensive, interdisciplinary legal advice from a single source. Furthermore, the arrangements between the parties laid out in the franchise agreement should be prepared in as much detail as possible and reviewed. As a law firm with expertise in a wide range of fields within commercial law, GRP Rainer Rechtsanwälte can assume responsibility for reviewing the arrangements set out in the franchise agreement and ensure that the final agreement satisfies both parties.

There are no legal requirements for franchise agreements, unlike in the case of e.g. rental or purchase agreements. Thus, it is all the more crucial for the key arrangements to be drafted in as much detail as possible and in doing so avoid any room for interpretation. In particular, aspects such as the duration, territorial protection, merchandizing as well as the terms relating to the expiry or termination of the agreement need to be clarified.

In the case of franchise relationships, the franchisor is generally viewed as the stronger party due to their advantage in knowledge vis-à-vis the franchisee. That is why the franchisor is subject to obligations requiring it to disclose specific information, e.g. concerning the workings of the franchise system. However, the legislature has to date failed to flesh out the franchisor’s duties to provide information. Notwithstanding this, the franchisor is not allowed to pique interest in collaboration using economic figures that are completely unrealistic and thus give rise to false expectations on the part of potential franchise partners. This kind of approach can ultimately result in the franchisee being able to assert claims for damages.

To avoid legal disputes from the outset, the opportunities and expectations ought to be reviewed realistically and the rights and obligations of the parties to the contract carefully defined. Experienced lawyers can be consulted to ensure that the partnership’s development satisfies both sides by competently and fairly drafting agreements.

https://www.grprainer.com/en/legal-advice/commercial-law/franchise-law.html