Latest updates
Appeals court finds clause allowing franchisor to unilaterally increase franchise fee to be invalid
Noerr LLP- Franchising
- Germany
- 22 December 2020
The Jena Higher Regional Court recently held that a clause which allows a franchisor to adjust the franchise fee at the beginning of each quarter and does not clearly disclose to the franchisee the scope of the fee increase mechanism is in breach of the law regarding general terms and conditions, which applies to standard-form contracts and thus standardised franchise agreements. The decision shows that caution is needed when drafting fee adjustment clauses.
What legal impact has the COVID-19 pandemic had on the franchise sector so far?
Noerr LLP- Franchising
- Germany
- 06 October 2020
The COVID-19 pandemic continues to significantly affect the franchise sector, along with many others. In May and July 2020 the German Franchise Association issued a guidance document which provided an overview of the COVID-19 Mitigation Act and the associated legal issues specific to franchising. A few months on, this article examines which issues remain the most relevant for franchising practice.
When the asterisk is missing: Munich Higher Regional Court's King of the Month decision
Noerr LLP- Franchising
- Germany
- 02 June 2020
Special deals are common among competing burger chains. Although this may be detrimental to franchisees, the Munich Higher Regional Court recently decided that such deals do not infringe antitrust rules. This decision deserves particular attention, as it concerns the common situation of a franchisor using non-binding price recommendations in its advertising and once again clarifies how important the asterisk reference is in such cases.
Inadmissible imitation of 'presentation of dishes': stronger protection for gastronomic concepts
Noerr LLP- Franchising
- Germany
- 13 August 2019
Franchisors must typically consider the extent of concept protection if franchisees which have left the franchise system reuse the concept in a largely unchanged fashion or if third-party competitors (outside the franchise system) copy the concept's main features. A recent decision concerning a fast-food restaurant franchise reinforces the IP protection of gastronomic concepts against competitors' inadmissible imitations.
Bogus self-employment and unethical franchise agreements
Noerr LLP- Franchising
- Germany
- 30 April 2019
Case law from the highest German courts on franchise law matters is rare, which makes a recent Federal Court of Justice decision on the subject of bogus self-employment of franchisees – a perennial issue for franchise law practitioners – even more noteworthy. The case concerned claims for payment under a licence agreement and the question of whether the licence agreement was void due to the franchisee's bogus self-employment.
For want of an asterisk: regional court scrutinises franchisor's TV advertising
Noerr LLP- Franchising
- Germany
- 15 January 2019
The Munich Regional Court I recently established a new precedent for competition restriction, which is prohibited in franchising systems under the Act against Restraints on Competition. The court found references to "participating restaurants" in a franchisor's TV advertising insufficient and in violation of the price maintenance prohibition. This decision deserves special attention as it relates to advertising with non-binding price recommendations, which is common among franchisors.
Admissibility of lawsuit despite effective mediation clause in franchise agreement
Noerr LLP- Franchising
- Germany
- 02 October 2018
A recent Hamburg Regional Court decision is generally understood to have solidified the first franchise-related court judgment on bad faith regarding mediation clauses rendered by the Saarbruecken Higher Regional Court in 2015. However, at second glance, the Hamburg judgment provides a different reasoning for bad faith regarding a mediation objection and might therefore serve as a new application of bad faith in future franchise-related court proceedings regarding mediation clauses.
Requirements for interim injunction to enforce obligation to operate business
Noerr LLP- Franchising
- Germany
- 06 February 2018
The Bochum Regional Court recently looked at whether a franchisee's contractual obligation to operate a business can be enforced by way of an interim injunction. To grant an interim injunction to enforce the obligation to keep the business open, it must be demonstrated that the franchisor faces serious losses at least equivalent to a threat to its survival or to drawbacks that cannot later be remedied.
No compensation claim for franchisee where franchisor must block customer data when agreement terminated
Noerr LLP- Franchising
- Germany
- 24 October 2017
The Federal Court of Justice recently ruled that an authorised dealer, such as a franchisee, has no compensation claim in analogous application of the regulation governing sales representatives contained in the Commercial Code if the franchisor is contractually obliged to block the customer data provided to it by the franchisee, to discontinue using it and to delete it at the request of the sales intermediary when the contract is terminated.
No significant obstruction to advertising franchise systems
Noerr LLP- Franchising
- Germany
- 04 April 2017
The Federal Court of Justice recently criticised a franchising advertising flyer in terms of competition law. One interpretation of this judgment is that it makes the advertising of franchise systems significantly more difficult. However, this point of view does not ultimately do justice to the decision, as the judgment does not fundamentally question the typical advertising of franchise systems.
Adequate substantiation of franchise and marketing fees in arrears
Noerr LLP- Franchising
- Germany
- 07 March 2017
A Brandenburg Higher Regional Court decision regarding the payment of franchise and marketing fees in arrears shows the importance of a substantiated presentation of a claim, as well as the importance of accurate, transparent and comprehensible billing by franchisors. The court could not ascertain whether there were unpaid franchise or marketing fees, as the franchisor failed to present sufficient facts demonstrating the exact amount of the franchise and marketing fees in the respective timeframes.
Federal Supreme Court decision complicates franchisor advertising on behalf of franchisees
Noerr LLP- Franchising
- Germany
- 14 June 2016
The Federal Supreme Court recently ruled that a franchisor's supplement containing prices stipulated as being "non-binding recommendations" obtainable only "in participating markets" constituted an act of unfair competition as the disclaimer was insufficient. The judgment raises questions about disclaimers, franchisor advertising obligations and whether franchisors are prohibited from enlisting franchisees to participate in a promotion.
Franchising and insolvency
Noerr LLP- Franchising
- Germany
- 08 March 2016
Sometimes a franchisee can no longer pay some or all of the price of goods purchased from the franchisor, the rent for the premises or the franchise fees. Deferrals or instalment agreements may be among the solutions. But what happens if the concessions of the franchisor or the efforts of the parties are inadequate and the franchisee falls into insolvency?
Protection of confidential know-how
Noerr LLP- Franchising
- Germany
- 29 September 2015
Franchise systems work based on the handover of know-how from franchisor to franchisee. To protect know-how, the franchisor can impose confidentiality obligations on the franchisee, even after the franchise agreement has ended. Methods of know-how protection should be dealt with in franchisee training in order to create awareness throughout the franchise system.
Termination of franchise agreements without notice
Noerr LLP- Franchising
- Germany
- 26 May 2015
The Munich Higher Regional Court recently dealt with a case of termination without notice due to breaches of a franchise agreement by a franchisee. The court dismissed the franchisee's claim since the termination was ultimately valid. The court concluded that each individual breach did not justify termination without notice; only on considering all breaches together did termination without notice appear defensible.
Franchisee has no right to compensation
Noerr LLP- Franchising
- Germany
- 24 March 2015
A commercial agent has a right to compensation at the end of a contract for the customer base it has established. The Federal Court of Justice has yet to clarify whether this applies analogously to franchisees – although it recently confirmed that franchisors will no longer be exposed to such a claim if their agreements do not contain an obligation to assign the customer base and such an obligation does not arise from other circumstances.
'Available only in participating outlets' notice inadmissible?
Noerr LLP- Franchising
- Germany
- 18 November 2014
An advertiser must display its identity on advertisements. Most advertisements do not have the space to list numerous franchisees and for this reason, supra-regional advertising by franchisors usually carries a footnote. According to the Dusseldorf Higher Regional Court, a footnote may breach the Act against Unfair Competition because the advertising does not list the identity of all participating dealers.
Compulsory pension insurance for franchisee as self-employed with employee-like status
Noerr LLP- Franchising
- Germany
- 19 August 2014
Every franchisee independently markets the franchise as a self-employed businessperson. This applies irrespective of the legal form that the franchisee selects for operating the franchise. The Regensburg Social Court recently considered whether a franchisee operating as a real estate agent was subject to statutory pension insurance contributions as a self-employed agent in accordance with the Social Code.
Pre-contractual franchisor disclosure obligations
Noerr LLP- Franchising
- Germany
- 29 April 2014
A landmark higher regional court judgment from 2011 provides crucial guidance on the form and extent of a franchisor's obligation to disclose the profitability of its franchise system. The court had to consider whether the franchisor had satisfied its pre-contractual disclosure obligations when presenting profitability projections to a prospective franchisee.
Contractual and statutory limits to competition by former franchisees
Noerr LLP- Franchising
- Germany
- 11 February 2014
A higher regional court recently questioned the extent to which unfair imitation arises if a franchisee continues to operate a franchise restaurant with an identical range of products, but under another label and colour concept. The court decided that the continuation of the defendant's sandwich restaurant at the same location under the name 'fresh!' was not prohibited as a hindrance to fairness.
