Franchising 2026

INTRODUCTION Contributed by: Babette Märzheuser-Wood, Dentons

• information about the fees and other charges pay - able by the franchisee; • details of intellectual property licensed; and • an overview of important contractual obligations such as restrictions on competition, renewal and termination provisions, and buyout options. Some countries require a market study – for example, France and Belgium. This can be time-consuming to prepare if the business has never traded in the terri - tory. It is important to carefully check the full list of required disclosure items applicable to the target country. It is not recommended to provide a franchisee in one country with financial data based on experience gained in another country. Timing of franchise disclosure Franchise disclosure must generally be made a cer - tain number of days before entering into the franchise agreement or paying money – typically between 10 and 30 days. Some countries allow a deposit to be paid – for example, Canada (Ontario; CAD50,000). Most countries do not permit the making of any pay - ment. Spain even prohibits the entry into a pre-con - tract. Remedies available to the franchisee if no disclosure has been made It is important to understand the rights and remedies available to the franchisee if there has been a failure to make the required disclosure. Typically, failure to disclose gives the franchisee the right to rescind the agreement and ask for both a refund of payments and damages. Some countries specify a time period for the exercise of these rights. For example, in Canada the period is two years. In other jurisdictions, such as France, it can be a defence that the franchisee was an experienced operator and did not rely on the disclo - sure information. In addition, countries such as China and Korea impose administrative fines. Franchise Registration Outside the USA, the registration of a franchise agree - ment is less common. Franchise registration should not be confused with the obligation to register the trade mark licence or the requirement to own a reg - istered trade mark. Some jurisdictions have followed the example of the USA and require the franchise

agreement to be registered with a government body before franchises can be offered for sale. Occasion - ally, registration is made after the franchise agreement has been concluded – for example, in Russia and Chi - na. In Indonesia, it is the obligation of the franchisee to register. It is generally in the best interest of both parties to comply with franchise registration obliga - tions to ensure that the franchise agreement cannot be invalidated. Without a registered franchise, some government bodies can take the view that foreign exchange payments cannot be processed. Relationship Laws An increasing number of countries require a franchise agreement to have a certain minimum amount of con - tent. Typically, these are commonsense requirements, obligating the parties to clearly document the most important rights and obligations that arise between them – such as, for example, the territory of opera - tion, the duration of the agreement and the dispute resolution mechanism. Some countries will reject the registration if these terms are not present. Blacklisting unfair terms in franchise agreements is a relatively new trend. Countries such as France, Ger - many and Italy use fair trading laws to ensure that the franchise agreement is fair and balanced. In Germany, any provision in a franchise agreement that deviates from the German Civil Code can be challenged and requires justification. In France and Italy, the competi - tion authorities have the power to investigate whether the franchise agreement is fair and balanced. Fran - chisees can raise a complaint and require unfair provi - sions to be struck out. The leading case in France is that of Subway, where the French competition authori - ties struck out an arbitration clause that would have required the franchisee to arbitrate in New York. In Italy, a group of franchisees filed a complaint against McDonald’s for unfair practices. McDonald’s gave undertakings to the authorities to discontinue certain practices. Other countries, such as Saudi Arabia, the Nether - lands and Malaysia, require specific rights and obli - gations to be included in the franchise agreement, such as approval rights for the franchisee, protection against termination for minor breaches and protec - tion against non-renewal without good cause. In the

FRANCHISING 2026

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