Franchising in Denmark: Agree a Business Continuity Plan

A prolonged system outage, water damage or a critical supply failure can put a franchise outlet out of action. As you prepare your existing business for franchising, your business continuity plan therefore needs to work across independent businesses. The aim is not to promise uninterrupted operations, but to agree who takes action, which alternatives are available and how costs will be handled.

1. Map the dependencies that could bring operations to a halt

Start with the functions the outlet cannot do without. These might include access to the booking system, power for refrigeration equipment, a particular product or usable premises. Consider both local incidents and failures in shared systems or services that could affect the entire franchise network at once.

Draw up a simple contingency checklist covering the following points for each critical function:

• What could fail, and what would the consequences be?
• Who detects the problem and raises the alarm?
• Is there a safe, practical workaround?
• Who can decide to restrict or suspend operations?
• Who contacts suppliers, customers and any relevant authorities?

Distinguish between inconvenience and an actual interruption to operations. A delayed delivery of packaging may simply require a substitute product, whereas losing access to essential customer orders could make normal operations impossible.

Prioritise dependencies where the franchisor has chosen the shared system or service. If everyone must use the same system, you should understand the supplier’s support terms, recovery options and limitations of liability. Do not promise franchisees a faster recovery than you can realistically deliver.

2. Make the agreement’s provisions on business interruption specific

Denmark has no dedicated franchise law and no specific registration scheme for franchise agreements. The relationship is governed primarily by the Danish Contracts Act and general principles of contract law and the law of obligations. Depending on the incident, legislation such as the Danish Sale of Goods Act, Business Lease Act and Product Liability Act may also be relevant.

Freedom of contract gives the parties scope to agree contingency arrangements, but it is not unlimited. Under section 36 of the Danish Contracts Act, unreasonable contractual terms may be amended or set aside. Ask a legal adviser to review limitations of liability and the allocation of risk, particularly where one party controls the system or service that fails.

A force majeure clause should do more than list exceptional events. It should explain which obligations may be affected, how the party must give notice and what reasonable steps must be taken to limit losses. Whether a particular event releases a party from liability depends on the agreement and the circumstances. A system outage or delivery delay is not automatically force majeure.

Also distinguish temporary relief from a specific supply obligation from the obligation to pay. An interruption to operations does not, in itself, mean that all recurring payments cease to be due. The agreement should explain whether particular services or payments will be suspended and how normal performance will resume.

3. Allocate decisions, communication and costs

The continuity plan must be usable while the problem is unfolding. Appoint a lead contact and a deputy for each party. Specify a contact route for urgent incidents and an alternative channel if the shared system is unavailable.

Also establish which decisions the franchisee can take immediately. These might include stopping sales of affected products or arranging emergency work to limit damage. Other measures, such as an expensive temporary system, may require approval. However, an approval procedure must not create uncertainty about necessary safety measures or applicable legal requirements.

Use a hypothetical incident to test the allocation of responsibilities: the shared booking system is unavailable throughout a busy trading day. Who contacts the system supplier? Can the outlet take bookings manually? Who informs customers, and how do you avoid conflicting messages?

Agree in advance how expenses should be documented and reported, without necessarily resolving every question of compensation within the continuity plan itself. Distinguish between emergency expenditure, lost revenue and third-party claims. Ask an insurance adviser to check which incidents the relevant policies actually cover. Business interruption insurance does not necessarily cover every type of disruption.

4. Test the plan before the first franchise outlet opens

Run a tabletop exercise with people from operations, management and the prospective local outlet. Choose one specific incident and work through the sequence from the initial fault report to the resumption of operations. The exercise should test decision-making processes, not participants’ ability to guess the right solution.

In particular, note missing telephone numbers, unclear authority and workarounds that do not work in practice. Then check that the continuity plan is consistent with the franchise agreement and the relevant supplier terms. An internal instruction cannot simply change the parties’ agreed rights and obligations.

Finally, agree who will update the contact list and when the plan will next be reviewed. Repeat the review whenever there are significant changes to systems, suppliers or working practices.

Practical takeaway: Identify the most critical interruptions to operations, allocate decision-making responsibility and test one incident before the first franchisee opens. A workable continuity plan combines clear contractual terms with actions that both parties can actually carry out.