Franchising in Denmark: Defining Sales Territories and Online Sales

When turning your existing business into a franchise network, you need to decide how customers and sales territories will be allocated. A local partner may expect protection against new outlets, while you may want to continue running your online shop and serving customers nationwide. Clarify geographical rights and sales channels before promising anyone a territory. Otherwise, growth can lead to disputes over the very customers the network depends on.

1. Map your existing customers and sales channels

Start with your business’s actual sales rather than a map of Denmark divided into equal-sized areas. Examine where customers come from, how they find you and where services are delivered. A customer’s billing address does not necessarily tell you which local unit carries out the work.

Draw up an overview of:

• Physical shops, customer-facing premises and mobile services.
• Your online shop, booking system and telephone enquiries.
• Existing business customers operating across multiple locations.
• Local campaigns and network-wide digital marketing.
• Areas where you already have company-owned units or plan to open them.

As a starting point, use aggregated sales data for this mapping exercise. If you share identifiable customer information, its processing must also comply with data protection rules.

Next, assess whether each proposed territory has a viable customer base. Population figures alone are not enough: travel times, competitors, customer types and capacity may matter more. A large geographical territory can be less attractive than a small area with concentrated demand.

The outcome should be a reasoned territory proposal, not a promise of a particular turnover. Explain the information used and any uncertainties so that prospective franchisees can assess the assumptions with their own advisers.

2. Be specific about territorial rights

The word ‘exclusivity’ is not precise enough. You may mean that you will not open another physical unit in the territory, while a prospective franchisee may understand it as a right to every customer with an address there. Those are very different expectations.

Set out separately what you may do, what other franchisees may do and which rights the local franchisee receives. Points to address include:

• Whether the territory is exclusive or non-exclusive.
• Whether protection covers physical premises, specific services or other activities.
• How company-owned units, the online shop and existing major customers are treated.
• Whether the franchisee has priority rights when additional units are opened.
• How boundaries are documented, for example through postcodes and a dated map.

Also distinguish between a sales territory and a service territory. A unit may be responsible for deliveries or servicing within an area without having the right to prevent everyone else from selling to customers there.

If protection depends on activity levels or capacity, the requirements must be transparent. Describe the measurement method, assessment period and opportunity to remedy shortcomings. Avoid vague provisions allowing you to change the territory whenever you choose.

3. Have the competition law position assessed before signing

Denmark has no dedicated franchise law, no specific statutory franchise register and no general franchise-specific requirement to provide a mandatory pre-contractual disclosure document. General rules still apply, however. The Danish Contracts Act, including section 36 on unfair agreements, and general principles of contract law are relevant to the agreement. The Danish Marketing Practices Act may apply to statements made during franchisee recruitment.

For sales territories, the Danish Competition Act and EU competition rules are particularly important. The EU Vertical Block Exemption Regulation, Regulation (EU) 2022/720, can provide a framework for certain agreements between businesses operating at different levels of the supply chain. It does not automatically approve a franchise agreement; market shares and the restrictions in the agreement are among the factors that must be assessed.

A key distinction is between active and passive sales. Active sales include, for example, targeted approaches or advertising aimed at particular customer groups or territories. Passive sales generally arise from unsolicited customer enquiries. A customer independently finding another unit’s website and placing an order is therefore not the same as a targeted campaign in that customer’s territory.

Some restrictions on active sales may be permitted under certain conditions. Restrictions on passive sales, by contrast, generally raise serious competition concerns, although specific exceptions exist. A blanket ban on the effective use of the internet may also breach competition rules.

Ask an adviser with competition law expertise to review the territorial model, digital restrictions and agreement wording together. The European Code of Ethics for Franchising is self-regulation, not Danish law, and does not replace this assessment.

4. Agree how online orders will be handled

A shared website needs clear operating procedures. Decide who receives the enquiry, contracts with the customer, issues the invoice and handles complaints. Customers must be able to identify the business they are dealing with.

Test the model against practical scenarios: a customer orders online, chooses collection outside their home territory and later requests servicing at home. Who carries out the work, and how are revenue and costs allocated? What happens if the local unit lacks capacity?

Document how shared customer enquiries are handled, too: the allocation criteria, response times and procedure if no response is received. Keep internal allocation procedures separate from restrictions on independent franchisees’ sales; a practical process must not conceal an unlawful customer-sharing arrangement.

Practical takeaway: Prepare one territory map, one overview of rights and a few concrete order examples. Have them legally reviewed and incorporate them consistently into the contractual documentation before offering your first territory.