Buying a franchise: Secure the right to remedy breaches before termination

A late report, a missed payment or a departure from the operations manual can cause conflict within a franchise network. Before buying a franchise in Denmark, you should therefore check when the franchisor can terminate the agreement for breach and whether you will first have an opportunity to put things right. This is not about avoiding responsibility, but about ensuring a fair and predictable response when operations do not go to plan.

Understand the difference between termination on notice and termination for breach

Termination on notice normally brings the agreement to an end after a notice period. Termination for breach, by contrast, is a response to a failure to meet contractual obligations and generally means that the relationship ends without the usual notice period. For you, this could mean losing the right to use the brand name, business concept and systems while still having to pay for premises, staff and finance.

Denmark has no specific franchise legislation. Franchise agreements are governed by, among other things, the Danish Contracts Act and general principles of contract law. Depending on the relationship, legislation such as the Danish Competition Act, Marketing Practices Act and Business Lease Act may also apply. There is neither a dedicated franchise register nor a statutory, standardised disclosure document that automatically gives you insight into the termination provisions.

Under general principles of contract law, termination for breach normally requires a material breach. However, the wording of the agreement has a significant bearing on that assessment. Section 36 of the Danish Contracts Act allows unreasonable terms to be amended or set aside, but you should not base your business planning on the assumption that this provision will later rescue you from a harsh commercial agreement.

Nor is there a specific statutory remedy period for franchisees. A clear contractual right to remedy breaches is therefore important.

Identify which breaches could trigger termination

Do not just read the section headed ‘breach’. Grounds for termination may appear in schedules, operations manuals, payment terms and provisions on inspections. Ask your adviser to compile them into a single overview, together with the consequences of each.

In particular, check whether the agreement treats the following situations differently:

• Late payments or missing reports.
• Departures from required opening hours, product ranges or quality standards.
• Failure to attend compulsory training.
• Breaches of confidentiality or unauthorised use of the trade mark.
• Situations that put customers at risk or involve serious breaches of the law.

An administrative mistake is not necessarily comparable to the deliberate disclosure of confidential information. The agreement should reflect the difference between issues that can be remedied and serious matters where immediate intervention may be justified.

Pay particular attention to wording such as ‘any breach’ or ‘at the franchisor’s sole discretion’. Such phrases can lead to disagreements over how minor a breach can be before termination is triggered. Also ask whether a breach of a separate supply agreement automatically counts as a breach of the entire franchise agreement.

Agree a specific process for putting things right

A useful remedy clause does more than simply give you a ‘reasonable period’. It explains how you will be notified, what the notice must contain and when the remedy period starts.

Seek to agree the following:

1. Formal written notice: The franchisor describes the breach and identifies the requirement that has not been met.
2. Clear remedial requirements: You are told what needs to change and what supporting evidence is expected.
3. An appropriate deadline: The time allowed reflects the nature of the breach. Making a payment and carrying out technical alterations will not necessarily require the same amount of time.
4. Confirmation that the breach has been remedied: There is a procedure for establishing whether the matter has been resolved.

Also clarify what happens if the remedy depends on the franchisor’s approval or the availability of a particular technician. You should not automatically bear the risk of a delay that you cannot prevent.

One option to propose during negotiations is an agreed action plan where a breach cannot be remedied within the normal period. This is not an automatic right, but a practical way to protect both your operations and the franchise network’s standards.

Examine repeat breaches and temporary measures

Some agreements allow termination for repeated breaches even if each individual breach has been remedied. Check what ‘repeated’ means: must the breaches be of the same type? Over what period? And does a disputed or undocumented incident count?

Also look for powers to temporarily block your access to ordering systems, stop supplies or suspend operations. These measures can have serious consequences before the agreement has formally been terminated. Ask for clear conditions, limits on the scope of any intervention and a procedure for restoring access, supplies or operations.

Finally, test the agreement against specific scenarios: a report is submitted late, a payment fails or an inspection identifies a quality issue. Can you tell from the wording what happens next and what opportunity you have to respond? If not, the terms should be clarified before you sign.

Practical takeaway: Ask an adviser to check that the provisions on breaches, formal notices, remedy periods and termination work together. Your most important protection is a clear process that gives you scope to put remediable problems right without weakening essential quality standards.