Franchising in Denmark: Prepare a Disclosure Pack Before Signing

When you turn your existing business into a franchise network, you know far more about the concept than a prospective franchisee does. A comprehensive disclosure pack helps narrow that gap. Its purpose is not to sell the dream or replace the franchise agreement, but to allow candidates to assess the offer, understand the uncertainties and ask informed questions before anyone commits.

1. Know the difference between a legal requirement and good practice

Denmark has no specific franchise legislation, no mandatory franchise disclosure pack and no specific statutory disclosure period before signing. Nor is there a requirement to register franchise agreements or a compulsory franchise register. That does not, however, mean that franchisors are free to withhold material information.

The Danish Contracts Act and general principles of contract law apply, including duties of good faith and liability during contract negotiations. The latter is often referred to as culpa in contrahendo: depending on the circumstances, a party may be liable for losses caused by wrongful conduct during negotiations. The rules on misleading practices in the Danish Marketing Practices Act are also relevant to how the offer is presented, while the Danish Competition Act governs, among other things, restrictions on competition within the agreement.

A disclosure pack is therefore a practical tool for providing a fair and accurate basis for a decision, not regulatory approval or protection against subsequent claims. Ask a lawyer to assess which matters should be disclosed for your particular concept.

At the same time, establish an internal process: provide the pack while the candidate still has a genuine opportunity to investigate the offer and walk away. Allow time for independent advice and questions. Do not present your own timetable as a statutory Danish reflection period.

2. Gather information that could change the candidate’s decision

Start by asking: what known facts would an independent business owner need before investing in this concept? Use the answer to select the information, rather than collecting every company document in a single folder.

A practical pack could include:

• The concept’s history: How long has it been operating, which units exist, and which are run by the franchisor and which by franchisees?
• The experience behind it: What has actually been tested, and which parts of the franchise model are still new?
• The full commitment: What investment, ongoing payments, purchasing obligations and operational responsibilities will the candidate be expected to take on?
• What the franchisor provides: What training, opening assistance and ongoing support are included, and what costs extra?
• Key dependencies: Does the concept depend on particular suppliers, permits, systems or rights?
• Known risks: For example, is a key supply agreement being renegotiated, or is there an unresolved issue concerning rights that could affect operations?

Also disclose relevant closures or franchise relationships that have ended, with a factual explanation where this is possible without breaching confidentiality or data protection requirements. An overview of units should not show only the success stories.

If you do not yet have any franchisees, make that clear. Experience from company-owned units is valuable, but it is not the same as a proven track record of supporting independent business owners within a franchise network.

3. Separate documented figures from expectations

Financial information requires particular care, because a candidate can easily interpret an example as a promise. Clearly label each set of figures as historical results, a budget or an illustrative calculation. Do not mix these categories in a presentation without a clear explanation.

For historical figures, describe the period covered, the units included and any relevant differences from the candidate’s planned unit. A well-established shop with favourable rent is not directly comparable to a new opening. Also explain if the accounts exclude costs that a franchisee would incur, such as franchise fees.

Budgets must be accompanied by their assumptions. These include expected customer numbers, staffing, opening hours and the point at which normal trading levels are expected. Identify what is based on experience and what is an estimate. A general disclaimer that results may vary is no substitute for specific explanations of material uncertainties.

Give the candidate an opportunity to review the material with their own accountant. The aim is not to persuade them to accept your budget, but to enable them to prepare and test their own.

4. Make questions and corrections part of the process

Appoint one person to take responsibility for the disclosure pack. They should gather information from operations, finance and legal advisers, and ensure that verbal answers do not contradict the written material.

Keep a simple log of the candidate’s questions, your answers and any outstanding issues. Respond in writing on matters that affect the investment. If something has not yet been resolved, identify it as unresolved rather than disguising it with optimistic wording.

If a material fact changes before signing, the candidate should receive the correction and have a genuine opportunity to assess it. An acknowledgement of receipt records that the material was provided; it does not, by itself, prove understanding or remove liability for inaccurate information.

Practical takeaway: Prepare a concise, factual disclosure pack, make uncertainties clear and resolve material questions before signing. This provides a better-informed starting point for working together within the franchise network.