Franchising in Denmark: Clarify Who Contracts with the Customer

When preparing an existing business for franchising, you may not be able to replicate your current sales process unchanged. Previously, the same company may have operated the website, received payment and supplied the goods. With independent franchisees, it must be clear who the customer is buying from. Otherwise, shared branding can conceal an unclear allocation of rights and obligations.

1. Choose the seller for each sales channel

A franchisee normally operates in its own name and for its own account. As a starting point, this means the franchisee enters into contracts with its own customers. The franchisor provides the business concept and branding, but that alone does not make it the customer's contracting party.

However, this division of responsibilities must reflect the actual sales process. A shared website might, for example, channel orders to local franchisees. Alternatively, it might be the franchisor's own online shop, with franchisees simply handling fulfilment. These two models should not be confused.

Before recruiting franchisees, map out all your channels:

• Sales and orders at the local outlet.
• Orders through a shared website or app.
• Telephone orders placed through a central number.
• Quotations for business customers involving delivery from several outlets.

For each channel, specify who makes the offer, accepts the order, invoices the customer and is entitled to payment. Also record who fulfils the order. The business carrying out the work is not necessarily the legal seller.

The aim is one identifiable contracting party for each customer contract, even where several members of the network contribute to fulfilment.

2. Distinguish between independent selling and acting as an intermediary

Denmark has no specific franchise legislation and no specific requirement to register franchise agreements. Nor is there a statutory franchise disclosure document with a fixed deadline for providing it. However, general contract law and duties of good faith apply, including the duty to disclose material information before entering into an agreement.

The Danish Contracts Act is central both to the franchise agreement and to the question of who can bind whom. Its rules on authority to act on another party's behalf may be relevant where a local outlet enters into contracts on behalf of the franchisor. The Danish Marketing Practices Act governs how the business presents itself to customers, while legislation including the Danish Sale of Goods Act and Consumer Contracts Act may apply depending on what is sold, to whom and how.

Take particular care if the franchisee does not sell for its own account but regularly arranges sales for the franchisor. Where this involves the sale of goods, the Danish Commercial Agents Act may apply, depending on the circumstances. Calling the arrangement a ‘franchise agreement’ does not, by itself, determine which rules apply; the substance of the relationship matters.

Seek a legal assessment of the model if the franchisor determines the customer contract and receives the sales revenue while the local business earns commission. This is not necessarily the same arrangement as independent resale.

3. Make the contracting party visible throughout the purchase

Start with the customer's experience rather than the organisational chart. The customer should be able to understand which business is the seller before entering into the contract. The shared brand name can be prominent, but it should not replace the necessary details of the specific business involved.

Review at least these touchpoints:

• Quotation: Does it show the seller's name and relevant business details?
• Order page: Can the customer identify the contracting party before completing the order?
• Order confirmation: Is the seller the same as the one identified during the ordering process?
• Invoice or receipt: Is the issuer consistent with the chosen model?
• Payment: Is it explained if another business receives the money on the seller's behalf?

Suppose, for example, that a customer orders a service through a shared website. If the local franchisee is the seller, the process must reflect that. A subsequent invoice from the local business will not necessarily resolve ambiguity in a process where the franchisor appeared to be the seller.

Test how orders are reassigned, too. If another outlet needs to take over the work, the system should not automatically treat this as an unrestricted change of the customer's contracting party. Distinguish between using another business to carry out the work and transferring the contract itself.

4. Put the authority in writing and test the sales process

The franchise agreement should state whether the parties can enter into customer contracts on each other's behalf. If they can, define the scope of that authority: which products, customers and actions does it cover? Who may amend an existing contract or accept special delivery terms?

An internal prohibition on binding the franchisor is not enough if the practical arrangements give customers a different impression. The agreement, staff instructions and digital templates must all be consistent.

Test the entire process with a standard order, an amendment and a cancellation. Ask the local outlet, central administration and accounts team each to explain who has entered into the contract. Disagreement signals that the model is not yet ready.

Practical takeaway: Create a simple sales map for each channel, identifying the seller, authority to act, payment recipient and outlet responsible for fulfilment. Use it to update agreements and customer-facing systems before the first franchisee takes over sales.