Even in a master franchise agreement, the franchisor has a comprehensive pre-contractual duty of disclosure. This was confirmed by the OLG Frankfurt with a judgment dated 12/8/2021 (Az. 4 U 251/20).
In commercial law, franchise law plays an increasingly important role. In this context, the franchisor has comprehensive pre-contractual duties of disclosure towards the franchisee. This duty of disclosure also exists in so-called master franchising, where a master franchisee is interposed, explains the commercial law firm MTR Legal Rechtsanwälte, which advises its national and international clientele in commercial law and franchise law.
This duty of disclosure from the master franchisor towards the master franchisee was confirmed by the OLG Frankfurt (Az. 4 U 251/20). In the underlying case, a master franchisor from Germany had concluded a master franchise agreement with a master franchisee from France, who was a start-up entrepreneur at the time. Both parties had agreed on German law and the jurisdiction of Frankfurt a.M.
The master franchisee failed to pay the agreed entrance fee, citing, among other things, that the franchisor had violated his pre-contractual duty of disclosure. The lawsuit filed by the master franchisor for the payment of the fee was unsuccessful.
The OLG Frankfurt initially stated that the franchisor has pre-contractual duties of disclosure. This duty is based on an information asymmetry between the two parties, whereby the franchisor generally has a significant information advantage. Therefore, the franchisor can assess the opportunities and risks of the business concept much better than an external start-up entrepreneur. The franchisor regularly has access to information regarding investment needs, sales, costs, and revenues, which the franchisee does not have. To balance this inequality, the franchisor is obliged to provide complete, unambiguous, and correct information about all circumstances that are recognizably of essential significance for the franchisee’s investment decision, according to the OLG.
This duty of disclosure was undisputedly violated in the present case. Thus, the franchisee was incorrectly informed about the revenue possibilities and incorrectly and incompletely informed about the prospects of success of the franchise system at the time of contract conclusion. Due to this violation of the duty of disclosure, the plaintiff franchisor had no entitlement to the payment of the entrance fee, decided the OLG Frankfurt.
Lawyers experienced in commercial law advise on franchise law at MTR Legal Rechtsanwälte.
