Franchising in Denmark: Agree ground rules for changes to the concept

When your existing business becomes a franchise network, you can no longer make every change through internal management decisions. A new till system, a revised product range or new shop fittings will affect the finances and operations of independent businesses. You should therefore establish a process for changes to the concept before signing the first franchise agreement. The aim is to keep the concept moving forward without imposing unpredictable obligations on franchisees.

1. Distinguish between routine updates and significant changes

Start by reviewing the changes you normally make in your own business. Which are minor adjustments, and which require investment, training or changes to working practices? That distinction needs to be clear before others invest in the concept.

A practical way to group changes is:

• Routine updates: Clarifications to working procedures, updated product descriptions and minor revisions to shared materials.
• Planned concept changes: New equipment, replacement of core IT systems or significant changes to the product range and premises layout.
• Urgent changes: Measures needed to address issues such as product safety or new legal requirements.

Describe these categories using examples from your own business. Avoid labelling every change a routine update. A new payment solution may look like a modest change from head office, but could require hardware, training and operational downtime locally.

Also assess the cumulative impact: several small changes can add up to a substantial burden. An annual change plan gives franchisees a better basis for planning staffing and investment, and makes it easier to spot overlapping projects.

2. Set out the right to make changes in the franchise agreement

Denmark has no dedicated franchise legislation. Franchise agreements are governed by the Danish Contracts Act and general principles of contract law, including freedom of contract. Section 36 of the Contracts Act allows unreasonable contractual terms to be amended or set aside following a case-by-case assessment. A broadly worded clause allowing the franchisor to change anything at will is therefore not a reliable solution.

Nor is there a franchise-specific statutory disclosure package or a requirement to register the franchise agreement with the Danish authorities. This makes a clear contract more important, not less. The absence of specific disclosure requirements does not exempt the parties from general rules on matters such as misleading conduct and liability.

The agreement should explain:

• Which parts of the concept the franchisor can change unilaterally.
• Which changes require a separate written agreement.
• How changes will be notified, justified and documented.
• How investment requirements and transition periods will be determined.
• How disagreements will be handled while the change is being resolved.

The operations manual can describe practical implementation, but should not be used as a shortcut to impose obligations without a sufficient contractual basis. Ask an adviser to ensure that the agreement and its schedules are consistent.

Other rules may also limit the right to make changes. For example, the Danish Competition Act and relevant EU competition rules need to be considered when changing sales or purchasing requirements. The Danish Marketing Practices Act is relevant to new campaigns. Codes of ethics are not Danish law, but may become binding through membership or agreement.

3. Make the implications clear before deciding

Introduce a short decision paper for every significant change. It should be a working tool that both franchisor and franchisee can understand, not a sales pitch for the project.

The paper should describe the purpose, the outlets affected, expected benefits, uncertainties and alternatives. Include both one-off and ongoing costs, as well as the time needed for training, installation and any period of running old and new systems in parallel. Also specify who pays for each item; responsibility for payment should not depend on a later verbal understanding.

Example: You want to introduce a shared booking system. The supplier’s subscription fee is only one part of the calculation. The franchisee may also incur costs for data migration, terminating the old service and training. If the system processes customer information, the parties’ roles and agreements must also be assessed under data protection rules.

Involve franchisees before the solution is finalised. They may identify local factors that are not apparent at head office. Consultation does not, however, amount to a right of veto: explain in advance whether participants are advising, approving or simply being informed.

Expected savings should be presented as projections with clear assumptions. If the supporting evidence is uncertain, a limited trial can reduce risk before a network-wide decision is made.

4. Agree a realistic transition and follow up

A notice period is only useful if the time can actually be used to prepare. Allow for delivery lead times, existing supplier agreements, peak trading periods and financing needs. There is no single statutory notice period for franchises that applies to all concept changes; the process must be based on the agreement and the circumstances.

Appoint someone to take responsibility, set milestones and define the criteria for completion. Also explain how temporary exceptions can be granted. Objective criteria and written reasons help maintain trust across the network, even when outlets cannot follow the same timetable.

For urgent matters, the process should be shorter but still documented. Explain why the measure is necessary, define its scope and review both its effects and its costs.

After implementation, compare the actual results with the decision paper. Use what you learn to improve the next change, rather than simply checking compliance.

Practical takeaway: Before you expand, create a framework for changes with clear categories, a contractual basis, an impact assessment and a transition plan. This gives the franchise network room to develop without making the ground rules unpredictable.