Franchising in Denmark: Make Shared Marketing Transparent

When your existing business becomes a franchise network, marketing becomes a shared responsibility. Franchisees may contribute to campaigns that you plan and commission, but their expectations about how the money should be spent may differ. You should therefore establish how shared marketing funds will be managed, accounted for and allocated before the first franchisee starts paying. This is not just about the size of the contribution, but about accountability and transparency.

1. Define what the shared funds can be used for

Start with a simple statement of purpose. Will the funds build brand awareness, generate customer enquiries or support seasonal campaigns? Several objectives can coexist, but they should be clear to everyone involved.

Next, draw up a list of permitted expenses. These might include advertising, photography, graphic design and production, and maintaining shared campaign web pages. Specify separately whether the fund can cover administration, internal staff time and external advisers, and how these costs will be calculated.

Separate customer-facing marketing from the recruitment of new franchisees. Recruitment advertising normally supports the franchisor’s expansion, whereas customer campaigns should benefit the participating businesses. If shared contributions are to fund both types of expenditure, the purposes and allocation of funds need to be particularly clear.

Also clarify how your existing company-owned outlets will participate. If they benefit from campaigns in the same way as franchisees’ outlets, state whether they will contribute on the same basis. This reduces the risk of the shared fund being seen as subsidising the franchisor’s own operations.

2. Make budgets and decision-making powers clear

Prepare a separate marketing budget showing expected contributions and planned expenditure. Keeping separate accounting records makes it easier to explain how the money is received and spent. Consider a separate bank account too, but bear in mind that this alone does not protect the funds from the franchisor’s creditors.

The franchise agreement should explain who makes the decisions. A marketing committee that includes franchisees can provide valuable local input, but it must be clear whether the committee is advisory or actually approves the budget. Avoid promising a shared say in decisions if the real authority rests with the franchisor.

Set out, among other things:

• When the budget and campaign plan will be presented.
• Who can approve expenditure outside the budget.
• How purchases from businesses connected to the franchisor will be handled.
• Whether unspent funds will be carried forward to the next period.
• How shortfalls will be handled and whether additional contributions can be charged.

Do not make additional charges an automatic consequence of overspending. The right to levy them, and the conditions for doing so, must be agreed. Also explain what happens to contributions that have been paid but remain unspent when a franchisee leaves the network. There should be no doubt about whether contributions carry any entitlement to a refund.

3. Allocate campaigns according to clear principles

Shared marketing rarely delivers exactly the same benefit to every outlet. A nationwide campaign may strengthen brand awareness, while geographically targeted advertising generates enquiries for individual shops. Explain the distinction between shared brand visibility and local customer acquisition.

Choose allocation principles that can be explained and checked. For example, you might combine a core level of marketing for the whole network with local activities based on documented needs. Explain how new outlets, seasonal fluctuations and areas with few participating outlets will be taken into account when setting priorities. Avoid promising each franchisee a particular level of turnover or sales that will precisely recoup their contribution.

At the same time, clarify where shared marketing ends and the franchisee’s own marketing begins. What materials will you provide? Which local campaigns need approval? Who pays for adaptations? The approval process should have a practical response time so that local opportunities are not missed.

Report regularly on both finances and activities. Show, for example, spending by campaign, the remaining budget and relevant results. Distinguish between advertising impressions, customer enquiries and verified sales. These are not the same, and any uncertainty in measurement should be made clear.

4. Align the scheme with Danish law and the agreement

Denmark has no dedicated franchise law, no franchise-specific registration requirement and no statutory standard disclosure package that must be provided before an agreement is signed. This does not mean that shared marketing contributions can be managed without clear obligations.

The Danish Contracts Act and general principles of contract law apply. Under section 36 of the Contracts Act, unfair contract terms may be amended or set aside. General duties of loyalty and disclosure may also require material information to be disclosed before signing. Be explicit, therefore, if contributions also cover administration or expenses other than advertising.

The Danish Marketing Practices Act applies to campaign content, while the Danish Competition Act and relevant EU competition rules may restrict how the market conduct of independent franchisees can be coordinated. Shared funding does not, for example, in itself give the franchisor the right to impose binding resale prices. Have the scheme legally reviewed and ensure that the payment obligations in the agreement match the stated arrangements for managing the fund.

Practical takeaway: Prepare a trial budget and a sample report before collecting the first contributions. If a prospective franchisee can understand who makes the decisions, what the money pays for and how spending is documented, you will have a stronger foundation for trust across the franchise network.