There is no statutory definition of ‘franchising’ in Germany. According to the definition of the German Franchise Association that is partly recognised by the courts, franchising is a sales and distribution system by means of which goods, services or technologies are marketed.

 

There are no legal requirements or compliance procedures imposed on the franchisor prior to offering franchises in Germany. There are no disclosure requirements under German Law for franchisors.

 

There are no specific laws or government agencies that regulate the offer and sale of franchises. The offer and sale of franchises is only governed by the general provisions of contract law (the German Civil Code), consumer law, commercial law (the German Commercial Code) and unfair trade and antitrust law. According to the law, the franchisor must disclose all necessary information to the franchisee. In particular, the provisions of the German Civil Code concerning standard terms can be applied where the franchisee has signed on a take-it-or-leave-it basis (section 307 of the German Civil Code). Accordingly, all contractual provisions need to be reasonable, otherwise they are void.

 

According to German consumer credit law, a franchisee is entitled to revoke the contract if it is, on entering into the contract, establishing an independent business enterprise, and the contract contains an obligation to repeatedly take supplies of goods. But such right of revocation does not exist if the total value of the franchisee’s investments exceeds an amount of €75,000.

 

German statutory law does not provide for special requirements that a franchisor must meet prior to offering franchises. However, the German Franchise Association provides numerous guiding principles in its Code of Ethics: (a) the franchisor must have successfully run a business concept for an appropriate period of time and with at least one pilot project before founding his franchise network; (b) the franchisor must be the owner or legitimate user of the company name, trademark or any other special labeling of his network; and (c) the franchisor must carry out initial training of the individual franchisee and must assure ongoing commercial or technical support or both to the franchisee during the entire term of the contract. Observance of these principles is obligatory in order to become and remain a member of the Franchise Association.