Franchise law is part of distribution law. When drafting franchise agreements, it must be considered that various legal areas must be taken into account.
When it comes to distribution channels and market opportunities, franchising plays an important role. Nevertheless, franchise law is not an independent field of law, but a complex part of distribution law. Since franchise law touches on several other legal areas such as civil law, commercial law, or antitrust law, these must also be incorporated into the content design of a franchise agreement, explains the commercial law firm MTR Rechtsanwälte, which has one of its advisory focuses on commercial and distribution law.
An important role in the drafting of a franchise agreement is played by commercial law. It must be ensured that the franchisee works independently and is not a sham self-employed person. The contract must not be structured in such a way that the franchisee provides services to the franchisor as an employee. This means the franchisee must and is allowed to operate independently in their business operations. According to § 84 of the German Commercial Code, a person is self-employed if they can essentially organize their activities freely and determine their working hours independently. The franchisee also bears their own entrepreneurial risk, with their profits based on the difference between the purchase price and the selling price of the franchisor’s products. Likewise, the franchisee, similar to a commercial agent, can have a compensation claim according to § 89b of the German Commercial Code.
In a franchise relationship, a vertical distribution system usually prevails. In this system, the franchisor typically sets the structures, and the franchisee commits to buying products from the franchisor. This is not objectionable under antitrust law in franchise agreements as long as cross-supplies between individual franchisees are possible. Furthermore, the franchisor must not dictate the sales price for the products to the franchisee. They can only give non-binding price recommendations.
Furthermore, a franchise agreement is also to be seen as a continuing obligation. As a result, civil law gives rise to termination regulations. For example, each party may terminate the contract for good cause without notice in accordance with § 314 of the German Civil Code. Additionally, the franchisor has pre-contractual duty of disclosure.
Lawyers experienced in commercial law and distribution law advise at MTR Rechtsanwälte also on issues of franchise law.
