Buying a franchise in Germany: check your right of withdrawal before signing

If you are joining a franchise network in Germany, do not assume you can simply withdraw from the agreement after signing. A statutory right of withdrawal may apply in certain business start-up circumstances, but it certainly does not cover every franchise agreement. Relevant factors include who is entering into the contract, whether it is being signed to start a business, and the goods or services agreed. These questions should therefore be addressed before signing, not in the days afterwards.

When a right of withdrawal may apply

Germany has no dedicated franchise law and no general statutory cooling-off period for buying a franchise. The relevant rules are found primarily in the German Civil Code (Bürgerliches Gesetzbuch, or BGB). In assessing a possible right of withdrawal, particular attention should be paid to the rules on consumer loans, financial assistance and instalment supply contracts, and how these apply to people starting a business.

Section 513 BGB extends certain protections to individuals who enter into qualifying contracts to begin a commercial or self-employed professional activity. Statutory conditions and a monetary limit apply. Simply describing someone as a ‘business founder’ at the top of the contract is not enough.

For franchise agreements, an obligation to purchase or receive goods on a recurring basis may be particularly relevant. In such cases, section 510 BGB on instalment supply contracts needs to be considered. A loan or financial assistance from the franchisor may also require a separate assessment. Ongoing franchise fees alone, however, do not automatically create a right of withdrawal.

For an initial assessment, answer these questions:

• Are you signing personally, or is a GmbH — a German private limited company — entering into the contract?
• Is the agreement intended to start your self-employed activity or expand an existing business?
• Does it require recurring purchases of goods, and how are those purchases structured?
• Does the package of agreements include a loan, deferred payment terms or other financing arrangements?

A GmbH is not an individual and cannot rely on the protection for business founders under section 513 BGB. Nor does signing online or away from business premises automatically give buyers acting for business purposes a consumer right of withdrawal.

Check the withdrawal notice and deadline together

Where a statutory right of withdrawal exists, the withdrawal period is generally 14 days. However, when it starts depends on the applicable provision and whether the relevant information requirements have been properly met. ‘14 days from signing’ is therefore not a reliable rule for every case.

Ask for the complete agreement, including all annexes and any notice explaining the right of withdrawal. In particular, check which agreement the notice covers, to whom withdrawal must be communicated, and what it says about when the period starts. If several companies are involved in the franchise network, the correct recipient must be clearly identified.

The presence of a withdrawal notice does not, by itself, prove that a statutory right of withdrawal exists. Equally, the absence of a notice does not mean there is no such right. Incorrect or missing information can affect when the withdrawal period starts and how long the right remains available; the consequences vary depending on the legal basis.

Practical check: Ask your independent legal adviser to record in writing the legal basis, scope and start of the withdrawal period for your specific package of agreements. Also retain the versions supplied to you and evidence of when you received them.

Make your withdrawal clear

Withdrawal is not the same as termination. Termination ends a contractual relationship under the rules that apply to it; a valid withdrawal generally triggers the unwinding of the agreement under the relevant statutory provisions. You generally do not need to give a reason for withdrawing.

If you wish to withdraw, your statement must clearly express your decision to withdraw from the agreement concerned. Identify the agreement, the date it was entered into and the contracting parties. Simply asking whether you could exit the agreement is not a reliable substitute.

For statutory withdrawal, sending the notice before the deadline is generally sufficient. Nevertheless, you should be able to prove its content, its recipient and that it was sent. An email with a retained record may be useful; do not rely on a telephone conversation with the sales representative handling your application.

Fees already paid, goods delivered or services provided may raise questions about how the agreement is to be unwound. There is no universal answer as to whether payments must be refunded or compensation for value received is payable. You should therefore not stop payments or operational activities without first checking your specific legal position.

Build contractual certainty before you start

Withdrawing from a franchise agreement does not automatically undo every other contract signed alongside it. A commercial lease, equipment purchase agreement and bank loan may remain in force. Special rules for linked agreements apply only where their statutory conditions are met.

Before signing, make a list of all agreements, noting the contracting party, the date each agreement was entered into and the potential consequences of unwinding it. This will help you identify which obligations could continue independently of the franchise agreement.

If the statutory right of withdrawal is uncertain or unavailable, you can negotiate an express contractual right to exit. It should clearly set out the deadline, the recipient of the notice, the required form and the financial consequences. However, such a right exists only if it has actually been agreed; a non-binding assurance during a sales conversation is no substitute for a robust contractual provision.

Conclusion: Do not treat a possible right of withdrawal as a free trial period. Before joining a franchise network, establish whether it applies to you, when the period starts and which other contracts would remain in force.