Franchising in Denmark: Plan for an Orderly Exit

When preparing your existing business for franchising, you should also plan for the day a unit leaves the network. A practical exit plan protects customers, the franchise concept and both parties to the agreement. It should set out not only when the relationship ends, but also who does what about signage, stock, digital access and outstanding payments. Here is an approach to putting those arrangements in place before signing your first franchise agreement.

1. Make the exit plan part of the agreement

Denmark has no specific franchise law, no separate mandatory franchise disclosure document and no specific requirement to register franchise agreements. The end of the relationship is therefore governed by the agreement and general legal rules, particularly the Danish Contracts Act and general principles governing contractual obligations. Section 36 of the Contracts Act allows unreasonable contract terms to be amended or set aside. The Danish Competition Act, the Marketing Practices Act and rules on matters such as trade marks may also be relevant.

You should therefore do more than include a sentence requiring the franchisee to ‘stop using the concept’. Set out the specific obligations in the franchise agreement or an accompanying exit schedule. The operations manual can explain the process, but it should not be the sole basis for significant financial obligations on exit.

Distinguish between a planned exit and termination for a material breach of the agreement. A planned exit may allow time for a jointly agreed timetable. On termination for breach, certain rights may cease immediately, while practical tasks still need to be handled properly.

Create a task list with four fields: action, person responsible, deadline and evidence of completion. Ask a lawyer to check that the deadlines and consequences are consistent with the agreement’s other provisions and the reason for the relationship ending.

2. Remove branding without confusing customers

Review every place where the unit presents itself as part of the franchise network. This goes beyond the sign above the premises. Workwear, packaging, vehicles, telephone messages, the website, social media profiles and business listings on digital maps may also suggest that the relationship is continuing.

Agree in advance:

• Which physical branding elements the franchisee must remove, and who pays.
• Who owns and administers local domain names and profiles.
• How names and descriptions will be changed on the exit date.
• How removal will be documented, for example through photographs.

You cannot simply take over a local profile because it has been used within the network. Ownership, administrator rights and the platform’s terms must be checked. Establish an agreed structure when these accounts are first created so that a future exit can be managed.

Prepare a neutral customer notice too. It should state the date the unit leaves the network and explain whom customers can contact about existing purchases. Avoid promising that the franchisor will take over all obligations unless this has actually been agreed and is legally possible.

3. Decide what happens to stock and equipment

Remaining stock can become the biggest practical source of disagreement during an exit. The franchisee may have paid for goods that can no longer be sold under the franchise branding once the relationship ends. At the same time, the franchisor will want to prevent uncontrolled use of the brand.

Specify whether certain goods must or may be bought back, whether a limited stock clearance sale is permitted, or whether branded materials must be destroyed. None of these options should be presented as a general statutory default for franchises; they need to be specifically agreed and legally assessed.

If a buyback is agreed, the terms should cover the condition and shelf life of the goods, documentation, transport and how the price will be calculated. Wording such as ‘buyback at a fair price’ can easily leave precisely the disagreement the clause was intended to prevent.

Draw up a separate equipment inventory. Distinguish between the franchisee’s own assets, equipment provided on loan and leased fixtures and equipment. The end of the franchise agreement does not automatically end a lease or subscription with another supplier. Identify which agreements require separate notice of termination or consent to transfer.

4. Close systems and settle finances in the right order

Set out the order in which access to ordering systems, shared email, the operations manual and other digital services will be withdrawn. If all access is cut off at once, the unit may lose the ability to complete orders or retrieve necessary accounting records.

The plan should distinguish between access for continued trading and limited access for winding down. Personal data must not simply be copied or handed over as part of a general transfer. Data protection rules and the parties’ specific roles must be respected, and records subject to statutory retention requirements must not simply be deleted.

Finally, agree a procedure for the final settlement: the last reporting period, outstanding fees, credit notes, any deposits and the handling of disputed amounts. Appoint a contact person for each party and finish with a written record of completed and outstanding tasks. Such a record does not automatically amount to a mutual waiver of claims.

Practical takeaway: Test the exit plan on your own unit: can you explain what must be removed, handed over, settled and retained? If the answer requires improvisation, clarify the agreement before the next franchisee joins the network.