Franchising in Denmark: Clarifying Companies and Contracting Parties

When expanding your existing business through franchising, you need to be clear about which businesses will be working together. The brand name is not necessarily the name of the legal entity entering into the agreement, and a prospective franchisee is not necessarily the person who will sign in their own name. Clearly defining the entities involved, their registrations and their responsibilities gives your franchise network a more secure foundation.

1. Decide which business will be the franchisor

Start with your own structure. Will your existing operating business also act as the franchisor, or will you place the franchise activities in a separate company? Denmark does not require franchisors to adopt a particular legal form, and setting up a new company is not, in itself, a prerequisite for expanding through franchising.

Your choice should reflect where the rights to the concept, employees, income and obligations sit. If your current business both runs company-owned outlets and supports franchisees, you need to be able to explain which business is responsible for each service.

Draw up a simple overview identifying:

• The business that enters into the franchise agreement.
• The business that owns the rights to the concept or is entitled to make them available.
• The business that provides training and ongoing support.
• The business that collects franchise fees.

This may be the same business throughout. If several companies are involved, the agreements between them should support the commitments you make to the franchisee. For example, the franchisor must hold sufficient rights to provide the agreed access to the concept in practice.

Discuss the structure with an accountant and a lawyer before transferring activities or rights. An additional company creates more administration and is not automatically a better solution.

2. Distinguish franchise rules from standard business registration

Denmark has no specific franchise legislation and no separate registration or regulatory approval process for franchise agreements. This does not mean that businesses can dispense with standard business registrations.

Franchise agreements are governed primarily by the Danish Contracts Act and general principles of contract law. Section 36 of the Contracts Act allows unfair agreements or terms to be amended or set aside. The Danish Competition Act, EU competition rules and the Danish Marketing Practices Act may also be relevant. Depending on the activities involved, company, tax, bookkeeping and employment rules, among others, will also apply.

Nor is there a statutory requirement for a franchise-specific disclosure document before signing. However, general duties to disclose information in good faith and liability for incorrect or misleading information still apply. You should therefore not present registration in Denmark’s Central Business Register (CVR) as approval of the concept or its financial viability.

Businesses register with the Danish Business Authority through the Virk business portal. For an ApS (a Danish private limited company) or an A/S (a Danish public limited company), the required documents include a memorandum of association and articles of association. VAT and employer registrations must be handled under the standard rules where the activities require them.

Make registration a separate item in your set-up plan. A signed franchise agreement is no substitute for business registration or any permits required for the business’s specific activities.

3. Name the correct franchisee in the agreement

Franchising involves independent businesses working together within a network. The franchise agreement must therefore identify the business that will actually operate the outlet and bear the obligations.

A candidate may negotiate as an individual but intend to run the business through an ApS. Avoid having the agreement signed in a personal capacity without proper consideration, then later treating it as though the company were the contracting party. Any change of contracting party should be expressly documented and handled with legal assistance.

Before signing, check:

• The legal name, CVR number and address.
• Whether the business has been established and has the intended legal form.
• Who is authorised to sign on the business’s behalf.
• Whether any personal guarantees have been agreed separately and clearly.

An owner’s signature on behalf of an ApS does not, in itself, constitute a personal guarantee. If you require that form of security, its terms and scope must be addressed separately so that the parties understand the consequences.

Also agree how changes to the legal form, ownership or contracting party must be notified and handled. An administrative update is not necessarily the same as a transfer of the entire agreement.

4. Align day-to-day administration with responsibility

Once the contracting parties have been established, day-to-day operations must reflect them. Customers can encounter a consistent brand, but a shared name and fit-out must not create uncertainty about which business they are dealing with.

Review invoice templates, payment systems, order confirmations and employment contracts. Check that the relevant business is correctly identified and that payments reach the business entitled to receive them. The business’s NemKonto — its designated account for payments from Danish public authorities — should be linked to its CVR number, and its finances must be kept separate from the owner’s personal finances.

If the franchisee’s business is the employer, it must handle employer registration and its payroll obligations. The franchisor’s assistance with systems or templates does not, in itself, make the franchisor the employer.

Appoint someone to check the details before opening and whenever changes occur. Keep the documentation together so that both the administration team and the franchisee work from the same information.

Practical takeaway: Create a single sheet listing legal names, CVR numbers, authorised signatories and payment responsibilities. Check it against the franchise agreement and the actual administrative arrangements before the first franchise outlet opens.