I. Economic data
A. Macro-economic data
-General data[1]
Population 2021: 83,196,078 inhabitants
Area: 357,022 km2
Density: 233 inhabitants/km2
GDP (nominal) 2022: $4,082.4 billion[2]
GDP/capita 2021: $42,919[3]
GDP (PPP) 2022: $5,323 billion[4]
GDP (PPP)/capita 2022: $63,521[5]
Growth rate 2021: 2.6%
Growth rate 2023 (IMF forecast): -0.5%
Growth rate 2024 (IMF forecast): 0.9%
GNI/capita (PPP) 2021: $59,630M
HDI 2021: 0.942[6]
Literacy rate: 99%
Life expectancy 2022: 81 years old
-Policy
Germany, a founding member of the European Union and of major global and regional economic and political bodies (Council of Europe, NATO, UN, OECD, G7, G20), is a federal republic made up of sixteen federated regions (called Länder), whose territory stretches from the North Sea and the Baltic Sea to the north of the Alps, and is crossed by some of Europe's greatest rivers, such as the Rhine, the Danube and the Elbe.
Germany is a parliamentary democracy. At the time of writing, the head of State is Federal President Frank-Walter Steinmeier, who merely represents the German State. Most executive power is exercised by the head of government, Federal Chancellor Olaf Sholz, who has held this position since December 8, 2021.
-Economic I. Economic data
A. Macro-economic data
-General data[1]
Population 2021: 83,196,078 inhabitants
Area: 357,022 km2
Density: 233 inhabitants/km2
GDP (nominal) 2022: $4,082.4 billion[2]
GDP/capita 2021: $42,919[3]
GDP (PPP) 2022: $5,323 billion[4]
GDP (PPP)/capita 2022: $63,521[5]
Growth rate 2021: 2.6%
Growth rate 2023 (IMF forecast): -0.5%
Growth rate 2024 (IMF forecast): 0.9%
GNI/capita (PPP) 2021: $59,630M
HDI 2021: 0.942[6]
Literacy rate: 99%
Life expectancy 2022: 81 years old
-Policy
Germany, a founding member of the European Union and of major global and regional economic and political bodies (Council of Europe, NATO, UN, OECD, G7, G20), is a federal republic made up of sixteen federated regions (called Länder), whose territory stretches from the North Sea and the Baltic Sea to the north of the Alps, and is crossed by some of Europe's greatest rivers, such as the Rhine, the Danube and the Elbe.
Germany is a parliamentary democracy. At the time of writing, the head of State is Federal President Frank-Walter Steinmeier, who merely represents the German State. Most executive power is exercised by the head of government, Federal Chancellor Olaf Sholz, who has held this position since December 8, 2021.
-Economic development
In 2023, for the first time since 2020, the German economy recorded a recession. The German Federal Statistics Office (Destatis) announced that in 2023, the first quarter showed slight growth (0.1%), followed by two quarters of stagnation and a final quarter of GDP decline (-0.3%). By 2022, German growth had reached 1.9%[7].
Nevertheless, Germany remains Europe's leading economy, and the world's fourth largest in terms of nominal GDP, behind the USA, China and Japan.
Germany is a very open market, both in terms of imports (1,495 billion euros, which was 39% of its GDP in 2022) and exports (1,577 billion euros in 2022, which was 41% of its GDP in 2022). This places it second worldwide in terms of exports of goods and services, just behind the United States.
Given this openness and its geographical proximity (Paris-Berlin: 1,100 km), Germany is France's leading trading partner. In 2022, Germany accounted for 13.8% of French exports (ahead of Italy, at 9.3%) and 12% of French imports (ahead of China, at 10.1%[8]). Moreover, France is Germany's fourth-largest trading partner.
In 2021, Germany had an inflation rate of 3.1% and an unemployment rate of 3.5%.[9]
-Resources
The German economy is largely driven by services (at around 69.8% of GDP), followed by industry (23.5%, with the production of iron, steel, chemicals and motor vehicles) and, to a lesser extent, agriculture (0.9%)[10].
-Population
It is the most populous country in the European Union and the second most populous on the European continent, after Russia. Its population is predominantly urban (with an urbanization rate of 78%[11] ).
14% of the population is under 15 years old, 64% between 15 and 65 and 22% over 65.[12]
Germany has three city-states: the federal capital Berlin, at the crossroads of Paris-Moscow and Copenhagen-Vienna (approx. 3.8 million inhabitants), Bremen (563,229 inhabitants in 2021) and Hamburg (1.89 million inhabitants in 2022).
The ten most populous cities in Germany are Berlin (3,755,251), Hamburg (1,892,122), Munich (1,512,491), Cologne (1,084,831), Frankfurt am Main (773,068), Stuttgart (632,865), Dusseldorf (629,047), Leipzig (616,093), Dortmund (593,317) and Essen (584,580).[13]
Germany's other main cities are Potsdam (Brandenburg), Schwerin and Rostock (Mecklenburg-Vorpommern), Mainz and Koblenz (Rhineland-Palatinate), Saarbrücken (Saarland), Magdeburg (Saxony-Anhalt), Hanover (Lower Saxony), Kiel and Lubeck (Schleswig-Holstein), and finally Erfurt (Thuringia).
-Foreign investment
Germany encourages foreign investment. It is one of the most open to foreign investment among OECD countries. Germany ranks fourth among the most attractive economies for foreign investment, according to the AT Kearney 2023 Foreign Direct Investment Confidence Index[14].
Foreign direct investment inflows in 2019 amounted to $57.8 billion. The European Union is the leading foreign investor, with $42.8 billion invested in 2019[15].
B. Economic data specific to franchising
- Historical background
While many countries only developed franchising in the mid-20th century, German companies have been using it since the 19th century, when the first franchises were granted to tavern owners.
- Institution
The German Franchise Association (Deutscher Franchise Verband EV)[16] was founded in 1978. A member of the European Franchise Federation, it has adopted the European Franchise Code of Ethics.
- Trade shows
The German Franchise Association organizes a Franchise Forum in Berlin, the next edition of which will be held on May 14 and 15, 2024[17].
Franchise Expo Germany will be held in Frankfurt am Main from November 7 to 9, 2024[18].
- Statistics[19]
According to the Germany Trade and Invest Agency, the German franchise sector has been growing faster than the overall economy for many years, with the sector recording gains of around 5% in 2022. According to the figures released, 930 franchise brands were present in the German market in 2022, representing 140,000 independent franchisees employing over 800,000 people (an increase of over 148% since 2009).
The breakdown of the franchising sector reveals a significant predominance in the service sector (52%), followed by retail (22%). This is followed by a fast-growing sector: hotels and catering (20%), crafts (7.3%), and specialized trades in construction and maintenance (6%).
- Contract content
Franchise agreements are usually concluded for ten years.
With regard to the franchisee's financial obligations at the start of business, it is noted that the average entry fee for franchisees amounted to 13,328 euros in 2017[20].
- Special features
The German franchising market is characterized by the wide variety of companies that have entered the sector.
- Economic impact[21]
According to the German Franchise Association, franchising generated a market worth 142 billion euros in 2022, representing growth of 4.7% compared to 2021. Franchise sales increased by 6.33 billion euros.
Again, according to the German Franchise Association, the sector employed 800,000 people in 2022, which also represents a slight increase on the year 2021 (when there were 749,240 people employed in the sector[22] ).
- International
The vast majority of franchise networks in Germany are of German origin (around 79%)[23].
On the export front, the Deutscher Franchiseverband has set up The Franchise Pool International to promote German brands abroad, as well as facilitating the introduction of foreign networks by generating contacts with local master-franchisees.
Brands setting up in Germany generally have two points of entry: either the development of an entirely new franchise system, supported by local franchisees, or the use of master-franchising, tailoring an established concept to the German market.
II. Legal information
A. Legal information directly related to franchising
- Applicable legislation
German franchise law is not governed by laws or regulations as such, and the rules applicable to franchising are mainly derived from case law, which is gradually refining its boundaries, and from other areas of law (commercial law, contract law, competition law, etc.).
In particular, the law on the regulation of general terms and conditions of contracts (AGBG), incorporated into the German Civil Code (Sections 305 et seq.), protects the franchisee's co-contractor against clauses in general terms and conditions or standard contracts (such as the franchise agreement) that create disadvantages for the franchisee that are considered unreasonable. Such clauses would then be considered null and void.
Soft law has also been introduced by the German Franchise Association, with its Code of Ethics, which lays down obligations for its members. Particular attention should be paid to its Code of Ethics which, while not binding on franchisors who are not members of this association, nevertheless constitutes a useful guide to good practice, helping to limit risks.
At the European level, the European Franchise Federation has drawn up the European Franchise Code of Ethics. Section 1 of the European Franchise Code defines franchising as a system of marketing products and/or services and/or technologies, based on close and continuous collaboration between legally and financially distinct and independent companies, the franchisor and its franchisees, in which the franchisor grants its franchisees the right, and imposes the obligation, to operate a business in accordance with the franchisor's concept. The right thus granted authorizes and binds the franchisee, in exchange for a direct or indirect financial contribution, to use the brand and/or trademark for products and/or services, know-how and other intellectual property rights, supported by the ongoing provision of commercial and/or technical assistance, within the framework and for the duration of a written franchise agreement concluded between the parties for this purpose.
- Pre-contractual information
Pre-contractual information for franchises is not subject to any specific regulations.
Nevertheless, under ordinary contract law, the franchisor is obliged to provide the franchisee with all necessary information. If the franchisor fails to do so, the franchisee may claim compensation for damages, or even annul the contract. This has been confirmed by a ruling of the Munich Higher Regional Court[24], which specifies that the franchisor must provide any information, within a reasonable time prior to signing the contract, which may affect the franchisee's consent.
The extent of the information to be provided by the franchisor is assessed on a case-by-case basis, according to the franchisee's needs.
In addition, the Code of Ethics drawn up by the German Franchise Association provides franchisors with minimum requirements for pre-contractual information to be provided to prospective franchisees.
There are no formal requirements as to how pre-contractual information must be provided. In practice, franchisors provide information in writing for evidential reasons.[25]
- Contract performance
The parties to a franchise contract are obliged to perform the contract in good faith (Sections 242 and 311 of the
German Civil Code), and following trade practice.
The franchisor is under no legal duty to renew the contract.
The franchisor may include in the contract an obligation for the franchisee to obtain the franchisor's prior consent for any transfer of the contract, or for the transfer of the franchisee's shares (particularly in the event of a change of control).
Similarly, at the end of the contract, German law allows the franchisor to impose a non-competition clause on the franchisee, within the limits imposed by national and European competition law.
At the European level, Section 2 of the European Franchise Code of Ethics specifies that franchisees must collaborate loyally for the success of the network they have joined, be responsible for the financial and human resources they commit to the franchise network, and act loyally towards all franchisees in the network.
The European Franchise Code of Ethics adds that the parties shall preserve the image and reputation of the network in the operation of their respective businesses, act fairly in their mutual relations and notify the other party of any breach of contract, respect the confidentiality of information relating to the franchise network, and resolve disputes in good faith and loyalty through direct communication and negotiation. If direct negotiation fails, the parties must seek to resolve the dispute in good faith through mediation and/or arbitration where appropriate (Section 2, paragraph 4).
- Jurisdiction and applicable law
As a member of the European Union, the Brussels I-bis Regulation[26], concerning the issue of jurisdiction, applies in Germany. This regulation contains rules for defining the competent court (Sections 1 to 6). It also provides for situations where the parties to a dispute have used a jurisdiction clause (Section 25) in their contract to set out the competent jurisdiction in advance.
On the question of applicable law, the Rome I regulation[27] applies when a dispute is brought before a court in a member State of the European Union. Under the Rome I regulation, the parties are free to choose the law applicable to their contract, and where no choice is set out, rules are laid down for determining the law applicable to the contract.
In addition, the parties may decide to have recourse to international arbitration in the event of a dispute. In this respect, Germany has ratified the New York Convention[28] enabling the recognition and enforcement of foreign arbitral awards.
- Trademarks
The German trademark system is governed by the Gesetz über den Schutz von Marken und sonstigen Kennzeichen. It is protected by registration in the German Trademark Register, by intensive use in the course of a commercial activity, or by virtue of its well-known character. The trademark is registered with the Deutsches Patent-und Markenamt.
German trademarks can include words, letters, numbers, images, colors, three-dimensional objects and sounds. Once registered, a trademark is protected for 10 years. Registration can be renewed indefinitely. Failure to use the trademark for five years may result in revocation.
Of course, to protect its trademark in Germany, a franchisor can also choose to register an international trademark covering the German territory.
Germany is a member of the Madrid System. The Madrid System[29] enables companies to obtain trademark protection in up to 130 countries by filing a single international application, in a single language, with the World Intellectual Property Organization (WIPO). Under Article 6 of the Madrid Agreement, a trademark registration is valid for 20 years.
It is also possible to register a European trademark with the European Union Intellectual Property Office.
Germany has also joined the Nice classification.
In Germany, trademark applications can be handled nationally both nationally and through the European or international systems. Examinations are conducted prior to registration and address formal objections and absolute grounds for refusal. Germany allows multi-class trademark registrations. Trademarks become vulnerable to cancellation for non-use five years from the registration date. To develop a franchise in this country, it is advisable to cover specific terms related to "Business assistance relating to franchising" in class 35, and to specify the intended goods or services for retail services, also in class 35. Recording a franchising agreement is not compulsory though advisable for legal advantages.
B. Peripheral legal data
- Competition law
As a member of the European Union, Germany is bound by European competition law.
German competition law is governed by the Restriction of Competition Act (Gesetz gegen Wettbewerbsbeschränkungen)[30]. It is now modelled on European competition law.
It therefore prohibits anti-competitive behavior, which naturally includes price fixing.
Similarly, German law prohibits the granting of absolute territorial exclusivity zones, whereby the franchisor might forbid the franchisee from both active and passive sales (though the latter must be authorized in any event).
Germany has enacted rules distinct from those applicable to anti-competitive practices, to regulate both unfair competition and unfair behavior. In 2004, it passed the "Gesetz gegen den unlauteren Wettbewerb", which lays down a general ban on unfair practices, and provides examples of sanctionable behavior.
At the European level, exemption regulation no. 2022/720 of May 10, 2022, on the application of Section 101 of the TFEU to vertical agreements, may allow the exemption of vertical agreements containing vertical restraints, provided that the agreement does not contain the fixing of a selling price or the imposition of a minimum selling price (it is, however, possible to impose a maximum selling price or to recommend a selling price). Nor must the agreement contain any restrictions on the territory in which the franchisee may sell the contracted goods or services (with certain exceptions), or any non-competition clause of indefinite duration or that exceeds five years, etc.
Germany has a federal competition authority, the Bundeskartellamt.
- Personal data
In Germany, the protection of personal data and privacy is governed by the General Data Protection Regulation (GDPR)[31], which is European Union legislation that applies uniformly to all member States. The GDPR was adopted in 2016 and came into force on May 25, 2018.
The GDPR establishes a comprehensive legal framework for the collection, processing and storage of personal data, guaranteeing respect for fundamental rights to privacy and data protection. The GDPR protects only the personal data of natural persons, but it must be complied with by any organization or person carrying out processing of personal data, whether automated or not, contained or intended to be contained in a file (Section 2 of the GDPR).
The GDPR applies when the controller (the person initiating the processing) and/or the processor are established in the territory of the Union, as well as when the personal data processed are those of people in the territory of the European Union (Section 3 of the GDPR).
The GDPR specifies that the data controller must have defined the purposes for which it wishes to process personal data. Furthermore, only the data strictly necessary to achieve these purposes must be processed, under the principle of data minimization.
Section 6 of the GDPR provides six legal grounds for processing data:
-the data subject has consented to the processing of his/her personal data for one or more specific purposes;
-processing is necessary for the performance of a contract to which the data subject is party or for the performance of pre-contractual measures taken at the data subject's request;
-processing is necessary to comply with a legal obligation to which the controller is subject;
-processing is necessary to safeguard the vital interests of the data subject or of another natural person;
-processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller;
-processing is necessary for the purposes of the legitimate interests pursued by the controller or by a third party, unless the interests or fundamental rights and freedoms of the data subject which require the protection of personal data prevail, in particular where the data subject is a child.
The competent authority in Germany is the Federal Commissioner for Data Protection and Freedom of Information.
- Special provisions for foreign investments
As a member of the European Union, Germany cannot, in principle, impose restrictions on the movement of capital from EU member States or non-EU countries, under Section 63 of the TFEU.
Germany has also been subject to European rules on foreign direct investment (FDI) since the Foreign Investment Screening Regulation[32] came into force. The purpose of this regulation is to establish a European framework for cooperation in the assessment of foreign investments likely to threaten security and public order in EU member States. Germany, as a member State, must notify and cooperate with the European Commission and other member States on foreign investments in critical sectors.
As a result, foreign investors can, in principle, invest freely in Germany.
However, in order to protect the German nation, Germany has introduced restrictions and notification requirements for acquisitions in industrial sectors linked to public order and security (defense, telecommunications, etc.).
- Special features
Unlike many federal States, Germany has not set up two parallel judicial systems (a federal system and a system specific to each Länd): it has a single judicial system.
Main websites :
-Deutscher Franchise Verband EV (German Franchise Association): www.franchiseverband.com ;
-Germany Trade and invest: https://www.gtai.de/en/invest;
-The Franchise Pool International: www.franchisepool.org;
-Competition law: https://www.bundeskartellamt.de/DE/Home/home_node.html;
-Intellectual property: https://www.dpma.de/;
-Personal data: https://bfdi.bund.de/DE/Home/home_node.html;
-World Bank: https://www.banquemondiale.org/fr/home.
[1] Unless otherwise stated, general data is taken from Atlas socio-économique des pays du monde, Larousse, 2024 édition.
[2] https://donnees.banquemondiale.org/indicator/NY.GDP.MKTP.CD?locations=DE
[3] https://www.tresor.economie.gouv.fr/Pays/DE/l-economie-allemande-en-bref
[4]https://donnees.banquemondiale.org/indicator/NY.GDP.MKTP.PP.CD?end=2022&most_recent_value_desc=true&start=1990&view=chart
[5] https://donnees.banquemondiale.org/indicator/NY.GDP.PCAP.PP.CD?locations=DE
[6] Human Development Report 2021/2022: Uncertain times, changed lives: shaping our future in a changing world, New York, United Nations Development Program, September 2022,
[7] Mission allemandes en France, "German GDP down 0.3% in 2023", 17.01.2024.
[8]https://www.tresor.economie.gouv.fr/Pays/DE/les-relations-economiques-entre-la-france-et-l-allemagne#:~:text=More%20in%20d%C3%A9tail%2C%20Germany,%C3%A0%2010%2C1%20%25
[9] Atlas socio-économique des pays du monde, Larousse, 2024 édition
[10] https://fr.statista.com/statistiques/669036/pib-allemagne-par-secteur/
[11]World Bank data https://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS?locations=OM-CN-TD-AL-DE&year_high_desc=true.
[12] Atlas socio-économique des pays du monde, Larousse, 2024 édition
[13] German Federal Statistical Office.
[14] https://www.kearney.com/service/global-business-policy-council/foreign-direct-investment-confidence-index
[15] OECD International Direct Investment Statistics 2020 | READ online (oecd-ilibrary.org)
[16] Deutscher Franchiseverband e.V. Luisenstraße 41, 10117 Berlin, tel: +49 30 278 902 0, e-mail: info(at)franchiseverband.com
[17] https://www.franchiseverband.com/aktuelles-erfahren/termine/detail/franchise-forum-2024
[18] https://www.franchise-expo.com/
[19] Unless otherwise stated, the data below is taken from Franchisage (gtai.de).
[20] Statista "Wer im Jahr 2017 einen Franchise-Betrieb eröffnen wollte, musste im Durchschnitt 13.328 Euro an den Franchise-Geber bezahlen.". Free translation from German to French: "Anyone wishing to open a franchise business in 2017 had to pay an average of 13,328 euros to the franchisor".
[21] Unless otherwise stated, the data below is taken from Franchisage (gtai.de).
[22] Deutscher Franchiseverband "The voice of the German franchise business".
[23] "Only 21% of all systems in Germany come from abroad", https://www.gtai.de/en/invest/industries/consumer-industries/franchising-65658.
[24] Munich Higher Regional Court, September 16, 1993, no. 6U5495/92
[25] https://www.franchise.org/sites/default/files/2022-09/2023%20Franchise%20-%20Germany.pdf
[26] Regulation n°115/2012 of the European Parliament and of the Council of December 12, 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters
[27] Regulation n°593/2008 of the European Parliament and of the Council of June 17, 2008 on the law applicable to contractual obligations
[28] 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards
[29] Madrid Agreement Concerning the International Registration of Trademarks
[30] https://www.gesetze-im-internet.de/gwb/BJNR252110998.html
[31] Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016
[32] Regulation no. 2019/452development
In 2023, for the first time since 2020, the German economy recorded a recession. The German Federal Statistics Office (Destatis) announced that in 2023, the first quarter showed slight growth (0.1%), followed by two quarters of stagnation and a final quarter of GDP decline (-0.3%). By 2022, German growth had reached 1.9%[7].
Nevertheless, Germany remains Europe's leading economy, and the world's fourth largest in terms of nominal GDP, behind the USA, China and Japan.
Germany is a very open market, both in terms of imports (1,495 billion euros, which was 39% of its GDP in 2022) and exports (1,577 billion euros in 2022, which was 41% of its GDP in 2022). This places it second worldwide in terms of exports of goods and services, just behind the United States.
Given this openness and its geographical proximity (Paris-Berlin: 1,100 km), Germany is France's leading trading partner. In 2022, Germany accounted for 13.8% of French exports (ahead of Italy, at 9.3%) and 12% of French imports (ahead of China, at 10.1%[8]). Moreover, France is Germany's fourth-largest trading partner.
In 2021, Germany had an inflation rate of 3.1% and an unemployment rate of 3.5%.[9]
-Resources
The German economy is largely driven by services (at around 69.8% of GDP), followed by industry (23.5%, with the production of iron, steel, chemicals and motor vehicles) and, to a lesser extent, agriculture (0.9%)[10].
-Population
It is the most populous country in the European Union and the second most populous on the European continent, after Russia. Its population is predominantly urban (with an urbanization rate of 78%[11] ).
14% of the population is under 15 years old, 64% between 15 and 65 and 22% over 65.[12]
Germany has three city-states: the federal capital Berlin, at the crossroads of Paris-Moscow and Copenhagen-Vienna (approx. 3.8 million inhabitants), Bremen (563,229 inhabitants in 2021) and Hamburg (1.89 million inhabitants in 2022).
The ten most populous cities in Germany are Berlin (3,755,251), Hamburg (1,892,122), Munich (1,512,491), Cologne (1,084,831), Frankfurt am Main (773,068), Stuttgart (632,865), Dusseldorf (629,047), Leipzig (616,093), Dortmund (593,317) and Essen (584,580).[13]
Germany's other main cities are Potsdam (Brandenburg), Schwerin and Rostock (Mecklenburg-Vorpommern), Mainz and Koblenz (Rhineland-Palatinate), Saarbrücken (Saarland), Magdeburg (Saxony-Anhalt), Hanover (Lower Saxony), Kiel and Lubeck (Schleswig-Holstein), and finally Erfurt (Thuringia).
-Foreign investment
Germany encourages foreign investment. It is one of the most open to foreign investment among OECD countries. Germany ranks fourth among the most attractive economies for foreign investment, according to the AT Kearney 2023 Foreign Direct Investment Confidence Index[14].
Foreign direct investment inflows in 2019 amounted to $57.8 billion. The European Union is the leading foreign investor, with $42.8 billion invested in 2019[15].
B. Economic data specific to franchising
- Historical background
While many countries only developed franchising in the mid-20th century, German companies have been using it since the 19th century, when the first franchises were granted to tavern owners.
- Institution
The German Franchise Association (Deutscher Franchise Verband EV)[16] was founded in 1978. A member of the European Franchise Federation, it has adopted the European Franchise Code of Ethics.
- Trade shows
The German Franchise Association organizes a Franchise Forum in Berlin, the next edition of which will be held on May 14 and 15, 2024[17].
Franchise Expo Germany will be held in Frankfurt am Main from November 7 to 9, 2024[18].
- Statistics[19]
According to the Germany Trade and Invest Agency, the German franchise sector has been growing faster than the overall economy for many years, with the sector recording gains of around 5% in 2022. According to the figures released, 930 franchise brands were present in the German market in 2022, representing 140,000 independent franchisees employing over 800,000 people (an increase of over 148% since 2009).
The breakdown of the franchising sector reveals a significant predominance in the service sector (52%), followed by retail (22%). This is followed by a fast-growing sector: hotels and catering (20%), crafts (7.3%), and specialized trades in construction and maintenance (6%).
- Contract content
Franchise agreements are usually concluded for ten years.
With regard to the franchisee's financial obligations at the start of business, it is noted that the average entry fee for franchisees amounted to 13,328 euros in 2017[20].
- Special features
The German franchising market is characterized by the wide variety of companies that have entered the sector.
- Economic impact[21]
According to the German Franchise Association, franchising generated a market worth 142 billion euros in 2022, representing growth of 4.7% compared to 2021. Franchise sales increased by 6.33 billion euros.
Again, according to the German Franchise Association, the sector employed 800,000 people in 2022, which also represents a slight increase on the year 2021 (when there were 749,240 people employed in the sector[22] ).
- International
The vast majority of franchise networks in Germany are of German origin (around 79%)[23].
On the export front, the Deutscher Franchiseverband has set up The Franchise Pool International to promote German brands abroad, as well as facilitating the introduction of foreign networks by generating contacts with local master-franchisees.
Brands setting up in Germany generally have two points of entry: either the development of an entirely new franchise system, supported by local franchisees, or the use of master-franchising, tailoring an established concept to the German market.
II. Legal information
A. Legal information directly related to franchising
- Applicable legislation
German franchise law is not governed by laws or regulations as such, and the rules applicable to franchising are mainly derived from case law, which is gradually refining its boundaries, and from other areas of law (commercial law, contract law, competition law, etc.).
In particular, the law on the regulation of general terms and conditions of contracts (AGBG), incorporated into the German Civil Code (Sections 305 et seq.), protects the franchisee's co-contractor against clauses in general terms and conditions or standard contracts (such as the franchise agreement) that create disadvantages for the franchisee that are considered unreasonable. Such clauses would then be considered null and void.
Soft law has also been introduced by the German Franchise Association, with its Code of Ethics, which lays down obligations for its members. Particular attention should be paid to its Code of Ethics which, while not binding on franchisors who are not members of this association, nevertheless constitutes a useful guide to good practice, helping to limit risks.
At the European level, the European Franchise Federation has drawn up the European Franchise Code of Ethics. Section 1 of the European Franchise Code defines franchising as a system of marketing products and/or services and/or technologies, based on close and continuous collaboration between legally and financially distinct and independent companies, the franchisor and its franchisees, in which the franchisor grants its franchisees the right, and imposes the obligation, to operate a business in accordance with the franchisor's concept. The right thus granted authorizes and binds the franchisee, in exchange for a direct or indirect financial contribution, to use the brand and/or trademark for products and/or services, know-how and other intellectual property rights, supported by the ongoing provision of commercial and/or technical assistance, within the framework and for the duration of a written franchise agreement concluded between the parties for this purpose.
- Pre-contractual information
Pre-contractual information for franchises is not subject to any specific regulations.
Nevertheless, under ordinary contract law, the franchisor is obliged to provide the franchisee with all necessary information. If the franchisor fails to do so, the franchisee may claim compensation for damages, or even annul the contract. This has been confirmed by a ruling of the Munich Higher Regional Court[24], which specifies that the franchisor must provide any information, within a reasonable time prior to signing the contract, which may affect the franchisee's consent.
The extent of the information to be provided by the franchisor is assessed on a case-by-case basis, according to the franchisee's needs.
In addition, the Code of Ethics drawn up by the German Franchise Association provides franchisors with minimum requirements for pre-contractual information to be provided to prospective franchisees.
There are no formal requirements as to how pre-contractual information must be provided. In practice, franchisors provide information in writing for evidential reasons.[25]
- Contract performance
The parties to a franchise contract are obliged to perform the contract in good faith (Sections 242 and 311 of the
German Civil Code), and following trade practice.
The franchisor is under no legal duty to renew the contract.
The franchisor may include in the contract an obligation for the franchisee to obtain the franchisor's prior consent for any transfer of the contract, or for the transfer of the franchisee's shares (particularly in the event of a change of control).
Similarly, at the end of the contract, German law allows the franchisor to impose a non-competition clause on the franchisee, within the limits imposed by national and European competition law.
At the European level, Section 2 of the European Franchise Code of Ethics specifies that franchisees must collaborate loyally for the success of the network they have joined, be responsible for the financial and human resources they commit to the franchise network, and act loyally towards all franchisees in the network.
The European Franchise Code of Ethics adds that the parties shall preserve the image and reputation of the network in the operation of their respective businesses, act fairly in their mutual relations and notify the other party of any breach of contract, respect the confidentiality of information relating to the franchise network, and resolve disputes in good faith and loyalty through direct communication and negotiation. If direct negotiation fails, the parties must seek to resolve the dispute in good faith through mediation and/or arbitration where appropriate (Section 2, paragraph 4).
- Jurisdiction and applicable law
As a member of the European Union, the Brussels I-bis Regulation[26], concerning the issue of jurisdiction, applies in Germany. This regulation contains rules for defining the competent court (Sections 1 to 6). It also provides for situations where the parties to a dispute have used a jurisdiction clause (Section 25) in their contract to set out the competent jurisdiction in advance.
On the question of applicable law, the Rome I regulation[27] applies when a dispute is brought before a court in a member State of the European Union. Under the Rome I regulation, the parties are free to choose the law applicable to their contract, and where no choice is set out, rules are laid down for determining the law applicable to the contract.
In addition, the parties may decide to have recourse to international arbitration in the event of a dispute. In this respect, Germany has ratified the New York Convention[28] enabling the recognition and enforcement of foreign arbitral awards.
- Trademarks
The German trademark system is governed by the Gesetz über den Schutz von Marken und sonstigen Kennzeichen. It is protected by registration in the German Trademark Register, by intensive use in the course of a commercial activity, or by virtue of its well-known character. The trademark is registered with the Deutsches Patent-und Markenamt.
German trademarks can include words, letters, numbers, images, colors, three-dimensional objects and sounds. Once registered, a trademark is protected for 10 years. Registration can be renewed indefinitely. Failure to use the trademark for five years may result in revocation.
Of course, to protect its trademark in Germany, a franchisor can also choose to register an international trademark covering the German territory.
Germany is a member of the Madrid System. The Madrid System[29] enables companies to obtain trademark protection in up to 130 countries by filing a single international application, in a single language, with the World Intellectual Property Organization (WIPO). Under Article 6 of the Madrid Agreement, a trademark registration is valid for 20 years.
It is also possible to register a European trademark with the European Union Intellectual Property Office.
Germany has also joined the Nice classification.
In Germany, trademark applications can be handled nationally both nationally and through the European or international systems. Examinations are conducted prior to registration and address formal objections and absolute grounds for refusal. Germany allows multi-class trademark registrations. Trademarks become vulnerable to cancellation for non-use five years from the registration date. To develop a franchise in this country, it is advisable to cover specific terms related to "Business assistance relating to franchising" in class 35, and to specify the intended goods or services for retail services, also in class 35. Recording a franchising agreement is not compulsory though advisable for legal advantages.
B. Peripheral legal data
- Competition law
As a member of the European Union, Germany is bound by European competition law.
German competition law is governed by the Restriction of Competition Act (Gesetz gegen Wettbewerbsbeschränkungen)[30]. It is now modelled on European competition law.
It therefore prohibits anti-competitive behavior, which naturally includes price fixing.
Similarly, German law prohibits the granting of absolute territorial exclusivity zones, whereby the franchisor might forbid the franchisee from both active and passive sales (though the latter must be authorized in any event).
Germany has enacted rules distinct from those applicable to anti-competitive practices, to regulate both unfair competition and unfair behavior. In 2004, it passed the "Gesetz gegen den unlauteren Wettbewerb", which lays down a general ban on unfair practices, and provides examples of sanctionable behavior.
At the European level, exemption regulation no. 2022/720 of May 10, 2022, on the application of Section 101 of the TFEU to vertical agreements, may allow the exemption of vertical agreements containing vertical restraints, provided that the agreement does not contain the fixing of a selling price or the imposition of a minimum selling price (it is, however, possible to impose a maximum selling price or to recommend a selling price). Nor must the agreement contain any restrictions on the territory in which the franchisee may sell the contracted goods or services (with certain exceptions), or any non-competition clause of indefinite duration or that exceeds five years, etc.
Germany has a federal competition authority, the Bundeskartellamt.
- Personal data
In Germany, the protection of personal data and privacy is governed by the General Data Protection Regulation (GDPR)[31], which is European Union legislation that applies uniformly to all member States. The GDPR was adopted in 2016 and came into force on May 25, 2018.
The GDPR establishes a comprehensive legal framework for the collection, processing and storage of personal data, guaranteeing respect for fundamental rights to privacy and data protection. The GDPR protects only the personal data of natural persons, but it must be complied with by any organization or person carrying out processing of personal data, whether automated or not, contained or intended to be contained in a file (Section 2 of the GDPR).
The GDPR applies when the controller (the person initiating the processing) and/or the processor are established in the territory of the Union, as well as when the personal data processed are those of people in the territory of the European Union (Section 3 of the GDPR).
The GDPR specifies that the data controller must have defined the purposes for which it wishes to process personal data. Furthermore, only the data strictly necessary to achieve these purposes must be processed, under the principle of data minimization.
Section 6 of the GDPR provides six legal grounds for processing data:
-the data subject has consented to the processing of his/her personal data for one or more specific purposes;
-processing is necessary for the performance of a contract to which the data subject is party or for the performance of pre-contractual measures taken at the data subject's request;
-processing is necessary to comply with a legal obligation to which the controller is subject;
-processing is necessary to safeguard the vital interests of the data subject or of another natural person;
-processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller;
-processing is necessary for the purposes of the legitimate interests pursued by the controller or by a third party, unless the interests or fundamental rights and freedoms of the data subject which require the protection of personal data prevail, in particular where the data subject is a child.
The competent authority in Germany is the Federal Commissioner for Data Protection and Freedom of Information.
- Special provisions for foreign investments
As a member of the European Union, Germany cannot, in principle, impose restrictions on the movement of capital from EU member States or non-EU countries, under Section 63 of the TFEU.
Germany has also been subject to European rules on foreign direct investment (FDI) since the Foreign Investment Screening Regulation[32] came into force. The purpose of this regulation is to establish a European framework for cooperation in the assessment of foreign investments likely to threaten security and public order in EU member States. Germany, as a member State, must notify and cooperate with the European Commission and other member States on foreign investments in critical sectors.
As a result, foreign investors can, in principle, invest freely in Germany.
However, in order to protect the German nation, Germany has introduced restrictions and notification requirements for acquisitions in industrial sectors linked to public order and security (defense, telecommunications, etc.).
- Special features
Unlike many federal States, Germany has not set up two parallel judicial systems (a federal system and a system specific to each Länd): it has a single judicial system.
Main websites :
-Deutscher Franchise Verband EV (German Franchise Association): www.franchiseverband.com ;
-Germany Trade and invest: https://www.gtai.de/en/invest;
-The Franchise Pool International: www.franchisepool.org;
-Competition law: https://www.bundeskartellamt.de/DE/Home/home_node.html;
-Intellectual property: https://www.dpma.de/;
-Personal data: https://bfdi.bund.de/DE/Home/home_node.html;
-World Bank: https://www.banquemondiale.org/fr/home.
[1] Unless otherwise stated, general data is taken from Atlas socio-économique des pays du monde, Larousse, 2024 édition.
[2] https://donnees.banquemondiale.org/indicator/NY.GDP.MKTP.CD?locations=DE
[3] https://www.tresor.economie.gouv.fr/Pays/DE/l-economie-allemande-en-bref
[4]https://donnees.banquemondiale.org/indicator/NY.GDP.MKTP.PP.CD?end=2022&most_recent_value_desc=true&start=1990&view=chart
[5] https://donnees.banquemondiale.org/indicator/NY.GDP.PCAP.PP.CD?locations=DE
[6] Human Development Report 2021/2022: Uncertain times, changed lives: shaping our future in a changing world, New York, United Nations Development Program, September 2022,
[7] Mission allemandes en France, "German GDP down 0.3% in 2023", 17.01.2024.
[8]https://www.tresor.economie.gouv.fr/Pays/DE/les-relations-economiques-entre-la-france-et-l-allemagne#:~:text=More%20in%20d%C3%A9tail%2C%20Germany,%C3%A0%2010%2C1%20%25
[9] Atlas socio-économique des pays du monde, Larousse, 2024 édition
[10] https://fr.statista.com/statistiques/669036/pib-allemagne-par-secteur/
[11]World Bank data https://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS?locations=OM-CN-TD-AL-DE&year_high_desc=true.
[12] Atlas socio-économique des pays du monde, Larousse, 2024 édition
[13] German Federal Statistical Office.
[14] https://www.kearney.com/service/global-business-policy-council/foreign-direct-investment-confidence-index
[15] OECD International Direct Investment Statistics 2020 | READ online (oecd-ilibrary.org)
[16] Deutscher Franchiseverband e.V. Luisenstraße 41, 10117 Berlin, tel: +49 30 278 902 0, e-mail: info(at)franchiseverband.com
[17] https://www.franchiseverband.com/aktuelles-erfahren/termine/detail/franchise-forum-2024
[18] https://www.franchise-expo.com/
[19] Unless otherwise stated, the data below is taken from Franchisage (gtai.de).
[20] Statista "Wer im Jahr 2017 einen Franchise-Betrieb eröffnen wollte, musste im Durchschnitt 13.328 Euro an den Franchise-Geber bezahlen.". Free translation from German to French: "Anyone wishing to open a franchise business in 2017 had to pay an average of 13,328 euros to the franchisor".
[21] Unless otherwise stated, the data below is taken from Franchisage (gtai.de).
[22] Deutscher Franchiseverband "The voice of the German franchise business".
[23] "Only 21% of all systems in Germany come from abroad", https://www.gtai.de/en/invest/industries/consumer-industries/franchising-65658.
[24] Munich Higher Regional Court, September 16, 1993, no. 6U5495/92
[25] https://www.franchise.org/sites/default/files/2022-09/2023%20Franchise%20-%20Germany.pdf
[26] Regulation n°115/2012 of the European Parliament and of the Council of December 12, 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters
[27] Regulation n°593/2008 of the European Parliament and of the Council of June 17, 2008 on the law applicable to contractual obligations
[28] 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards
[29] Madrid Agreement Concerning the International Registration of Trademarks
[30] https://www.gesetze-im-internet.de/gwb/BJNR252110998.html
[31] Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016
[32] Regulation no. 2019/452
