Franchising in Denmark: Agree a Clear Route Through Disputes

When your existing business becomes a franchise network, you gain partners with investments and interests of their own. Disagreements therefore cannot be handled like internal staffing matters. Before the first franchise agreement is signed, you should establish how the parties will raise, investigate and resolve disputes. The aim is not to avoid every disagreement, but to protect operations and the working relationship while it is being resolved.

1. Understand the Danish legal framework

Denmark has no specific franchise legislation and no compulsory franchise registration. Nor is there a statutory dispute resolution procedure that automatically applies to franchise networks. The franchise agreement and general Danish contract law therefore play a central role when the parties disagree.

The Danish Contracts Act and general principles of contract law apply. Freedom of contract is the starting point, but this does not mean that every term will necessarily be enforceable. Under section 36 of the Contracts Act, an agreement may be amended or set aside, in whole or in part, if enforcing it would be unreasonable or contrary to fair dealing.

Depending on the nature of the dispute, legislation including the Danish Competition Act, Marketing Practices Act, Sale of Goods Act, Business Lease Act and Interest Act may also be relevant. An internal procedure cannot override mandatory legal rules.

There is also no specific disclosure document required by Danish law before a franchise agreement is signed. However, general principles concerning the duty to disclose information in good faith and liability during contract negotiations may be relevant if material information is withheld or provided incorrectly. A dispute over promised results is therefore not necessarily limited to the wording of the signed agreement.

Ask a lawyer to review the dispute resolution clause alongside the rest of the agreement. It needs to fit the actual structure of the relationship, rather than simply resemble a standard clause.

2. Build a simple escalation process from initial notice to management discussions

Create a procedure with a few clear steps. A franchisee busy with day-to-day operations should be able to use it without first having to draft a formal legal submission.

The first step is written notice. Designate a contact person for each party, along with a deputy. The notice should describe the problem, the relevant contractual provision if known, the impact on operations and the desired outcome. Attach relevant evidence rather than lengthy interpretations of the other party’s motives.

The second step is an investigation and response. Agree deadlines for acknowledging receipt and providing a reasoned response. These deadlines are practical choices for the parties, not specific Danish legal requirements. Distinguish between routine disagreements and matters requiring urgent action.

The third step is management discussions. If the contact persons cannot find a solution, the matter should be escalated to people authorised to agree a compromise. A meeting involving people without decision-making authority risks merely prolonging the dispute.

Also explain what happens if one party fails to respond. The procedure should allow the matter to move to the next stage, so that silence cannot be used to block progress.

3. Keep dispute records and day-to-day operations separate

A franchise network can suffer if a limited disagreement brings every aspect of the relationship to a halt. Agree how the parties will manage ongoing operations during a dispute without either party giving up its rights.

Imagine that a franchisee disputes an invoice for a shared service. The practical task is to identify precisely which item is disputed and the contractual basis for it. The disagreement should not automatically turn into an argument about all payments and supplies.

Use a shared case summary covering:

• A brief description of each disputed point.
• The parties’ positions and relevant evidence.
• Any temporary arrangements and how long they will last.
• The people responsible and the next deadline.
• The points on which the parties already agree.

Temporary arrangements should be confirmed in writing. Specify whether an arrangement applies only while the dispute is being considered, and obtain legal help with wording any reservations of rights.

Avoid making continued operations an unconditional obligation in every situation. Serious circumstances may call for a different response. The agreement should also address how urgent problems can be escalated without requiring the parties to complete every stage of dialogue first.

4. Choose a realistic last resort

If management discussions fail, mediation can be an agreed next step. A neutral third party helps the parties find a solution but does not issue a binding decision. Agree how the mediator will be selected, how costs will be shared and when the mediation attempt will end.

Then make an explicit choice between court proceedings and arbitration. Arbitration should not be the automatic choice. Consider the costs, the need for confidentiality, the likely value of a dispute and the limited scope for challenging an arbitral award. If court proceedings are chosen, obtain legal advice on jurisdiction and governing law.

Also ask your lawyer to clarify how the procedure interacts with limitation periods and the availability of urgent legal remedies. The parties should not assume that internal negotiations alone will preserve their claims.

Practical takeaway: Write a short dispute resolution procedure before the first agreement is signed: a designated contact, clear response deadlines, management discussions and a carefully considered last resort. Test it against a hypothetical disagreement, and revise any steps that no one can explain or carry out.