Considering the extremely varied configurations and structures of franchise systems generally speaking it is difficult to define the concept of „Franchising“ in a distinct, unambiguous and concise manner. There is no such thing as a statutory definition of this term and it is, therefore, rather so that any definition of this concept must be restricted to a specification of the practical contents of each type of franchise contracts. Basically the franchise system is a distribution system which is used to market goods and/or services and/or technologies. It is based on the principle of close and continued cooperation of legally and financially independent and autonomous firms or legal entities, i.e. the franchiser and its franchisees. The franchiser grants to its franchisees the right and at the same time imposes upon them the obligation to run a business in line with the franchiser’s concept for either a direct or an indirect remuneration. This right entitles and obliges a franchisee to, for either a direct or an indirect remuneration, use the franchiser’s system name and/or trade mark and/or service mark and/or other industrial property rights or copyrights as well as the franchiser’s know-how, economic and technical methods and business system.
In drafting a franchise contract it is the task of a lawyer to outline and specify the rights and the obligations which the contracting parties have in and under differing franchising systems. Contracts which are already in operation may have to be checked for their effectiveness. In this respect it is not only necessary to verify whether the rules of the consumer credit laws and the laws governing general business terms and conditions are in fact complied with, but to also look at anti-trust law aspects which may come into consideration, which applies in particular for potential violations of bonos mores of a franchise contract.
Another problem which comes up time and again in connection with franchise law and franchise contracts is the issue of liability arising in relation to both the consumers and in the relations between the franchise parties, the relevant aspects being those of tort liability law and product liability as well as competition law aspects.
If you have any questions pertaining to issues of franchising law we shall be happy to help you.