Buying a franchise: Get promises and information in writing

When you buy into a franchise network, you will often encounter presentations, sales materials and verbal promises long before the contract is ready. But there may be a gap between what you are told and what the franchisor actually commits to. Make reviewing pre-contract information a systematic part of your due diligence: what is documented, what is an expectation, and what needs to become a binding commitment?

Understand Denmark’s pre-contract disclosure rules

Denmark has no specific franchise law. Nor is there a mandatory franchise disclosure document, a specific statutory disclosure period before signing, or a public registration scheme for franchise agreements. General business registration requirements may still apply. You therefore cannot assume that the materials have been checked by a public authority or follow a mandatory template.

Franchise agreements are governed, among other things, by the Danish Contracts Act and general principles of contract law. The starting point is freedom of contract. Section 36 of the Contracts Act allows unreasonable agreements to be amended or set aside, but this provision is no substitute for a thorough review before you buy.

The absence of specific disclosure rules does not mean that a franchisor is free to withhold material facts or provide false information. General principles concerning the duty to disclose information in good faith, as well as the rules of the Danish Marketing Practices Act, may be relevant. Depending on the circumstances, misleading information may have consequences for the agreement or give rise to liability for damages. This depends, among other things, on the significance of the information, what the parties knew and the available evidence.

The European Code of Ethics for Franchising can serve as a benchmark for proper pre-contract disclosure. It is not Danish law. Ask whether the franchisor has committed to a particular code, and clarify which rules apply and how they are enforced.

Request a complete, dated document pack

Ask for the materials well in advance so that you and your advisers can review them without an artificial signing deadline. Agree on a realistic review period once all material documents have been received. This is something you need to negotiate, not a specific statutory right for franchise buyers.

The document pack should include, at a minimum:

• The full draft agreement, with all schedules and any rules it refers to.
• An overview of the legal entities responsible for selling the franchise rights, entering into the agreement and providing the services.
• Dated sales materials and written answers to your key questions.
• A description of the concept’s development and its track record of operating in Denmark.
• Details of any known circumstances that could specifically delay or prevent the planned opening.

If an operations manual is confidential, access under a confidentiality agreement may be a solution. However, you should not accept unknown obligations simply because you are told you will receive the manual after signing. Ask for access to the relevant sections and a clear indication of which version applies.

Then draw up a document list recording each document’s title, date and version number. Note what is missing and who is responsible for supplying it. A folder containing lots of files is not necessarily a complete document pack.

Distinguish between facts, expectations and promises

Review presentations and meeting notes, marking three categories: verifiable facts, future expectations and specific commitments. Each needs to be treated differently.

The statement ‘the concept has been tested in Denmark’ is information you can ask the franchisor to substantiate. Ask where and when the testing took place, and whether it involved the same concept you are being offered.

The statement ‘we expect to be ready to open in the autumn’ is an expectation. Clarify the assumptions behind it and who bears the risk if the timetable slips.

The statement ‘we will deliver equipment ready for opening before the handover’ may be a specific commitment. If it is crucial to your purchase, the contract should describe what will be supplied, the deadline and the consequences of failing to deliver.

After each important meeting, send the franchisor a short summary and ask for explicit confirmation or corrections. A lack of response is not, in itself, a reliable indication of acceptance. Keep both the questions and the answers alongside the presentation they relate to.

Make key information part of the agreement

Identify the information on which your decision to buy actually depends. Ask a franchise solicitor to assess whether it should be incorporated as representations, specific obligations or conditions that must be met before the agreement takes effect.

Pay particular attention to clauses stating that the contract constitutes the entire agreement between the parties, or that earlier statements are not binding. Such wording may affect how earlier promises are assessed. Make sure important commitments do not appear only in a presentation or an email.

Also agree on the order of precedence of the documents, so it is clear which provisions prevail if the contract and its schedules conflict. If significant changes are made at the last minute, ask for a new, consolidated version and time to review it.

Practical takeaway: Do not sign while crucial questions remain unanswered. Gather the materials, get key information confirmed, and put the promises on which your purchase depends into the agreement.