Even in a master franchise agreement, the franchisor has a comprehensive pre-contractual duty of disclosure. The OLG Frankfurt confirmed this with a judgment dated December 8, 2021 (Case No. 4 U 251/20).
In commercial law, franchise law plays an increasingly important role. The franchisor has comprehensive pre-contractual disclosure obligations towards the franchisee. This duty of disclosure also applies 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 clients in commercial law and franchise law.
This duty of disclosure of the master franchisor towards the master franchisee has been confirmed by the OLG Frankfurt (Case No. 4 U 251/20). In the underlying case, the master franchisor from Germany had entered into 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 entry fee and justified this, among other things, by claiming that the franchisor had violated its pre-contractual duty of disclosure. The master franchisor’s lawsuit for payment of the fee was unsuccessful.
The OLG Frankfurt initially stated that the franchisor is subject to pre-contractual disclosure obligations. This duty is based on an information imbalance between the two parties, where the franchisor usually has a significant informational advantage. Therefore, the franchisor can assess the chances and risks of the business concept much better than an external start-up entrepreneur. The franchisor regularly has information on investment needs, sales, costs, and revenues that the franchisee does not have. To balance this inequality, the franchisor is obliged to provide complete, unmistakable, and correct information about all circumstances that are recognizably of essential importance for the franchisee’s investment decision, according to the OLG.
This duty of disclosure was indisputably violated in the present case. For instance, at the time of contract conclusion, the franchisee was incorrectly informed about the sales opportunities and incorrectly and incompletely informed about the prospects for success of the franchise system. Due to this violation of the duty of disclosure, the suing franchisor had no claim to the payment of the entry fee, decided the OLG Frankfurt.
Attorneys experienced in commercial law advise at MTR Legal Rechtsanwälte on questions of franchise law.
