Buying a Franchise: Check Personal Involvement and Cover Requirements

A franchise network depends on its members’ commitment. But there is a significant difference between taking responsibility for a business and being required to work on site every day. If you are considering buying a franchise in Germany, you should therefore establish how much personal involvement the contract requires. This will determine whether the concept fits your day-to-day life and whether the business can keep operating if you are ill or otherwise unavailable.

1. Do not confuse personal involvement with responsibility for the business

Franchisees are legally independent business owners. However, this does not automatically mean they can delegate every task. A franchise agreement may require you to manage the business personally, devote all your working time to it or restrict your outside work. The Limburg Chamber of Industry and Commerce (IHK Limburg) expressly lists these obligations as possible contract terms.

So check not only what your business must deliver, but also who is expected to do the work personally. There are important practical differences between the following provisions:

• You are responsible for ensuring compliance with the franchise system’s standards.
• You must handle the day-to-day management yourself.
• You must be personally present at specified times.
• You must devote all your working time and effort to the business.

The first provision generally gives you more flexibility in organising the business than a comprehensive requirement to be personally present. However, the actual extent of your obligations can only be established by reviewing the entire agreement and its appendices.

Ask for clarification of vague terms such as “as your main occupation”, “in full” or “personally managed”. A verbal assurance that you can easily appoint a manager later is no substitute for a suitable contractual provision.

2. Understand the legal limits in Germany

Germany has no specific franchise law. Nor is there a government franchise register or a special requirement to register franchise agreements. The principal legislation includes the German Civil Code (BGB), the German Commercial Code (HGB), where applicable, and other general laws. Franchise agreements typically combine elements of several types of contract.

For standard contract terms, sections 305 to 310 of the BGB are particularly important. Under section 307, provisions may be invalid if they place the other contracting party at an unreasonable disadvantage. A lack of clarity or comprehensibility may also be relevant. Special rules apply to business-to-business transactions, however; not every consumer protection rule carries over unchanged.

A requirement for personal involvement is therefore neither automatically invalid nor permissible without limits. Relevant factors include the wording, scope and contractual context, as well as the parties’ legitimate interests. A concept that relies heavily on the owner’s personal attention needs to be assessed differently from a model designed to operate with employed managers.

Mutual duties to have regard for the other party’s rights and interests arise even during contract negotiations, under sections 311(2) and 241(2) of the BGB. You should therefore not conceal any restrictions on your availability that are material to entering into the agreement. If you intend to limit your personal involvement on a permanent basis, raise this openly and record the agreed arrangement in writing. Simply planning to ignore a clause later because you believe it to be invalid is not a sound approach.

3. Agree specific rules on management cover and outside work

A good cover arrangement does more than establish whether you may hire staff. It sets out the circumstances in which someone else can take over management of the business.

Before signing, clarify the following in particular:

• Requirements: What experience, training or other qualifications must the person providing cover demonstrate?
• Approval: Is the franchisor’s approval required, and what criteria will be used to make the decision?
• Procedure: What documents must be submitted, and what response deadline will be agreed?
• Unexpected absence: Who may step in immediately if you suddenly become ill?
• Extended absence: What arrangements apply, for example, during a prolonged illness or when family caring responsibilities arise?

Distinguish between temporary cover and permanent management by an employed manager. Permission to arrange cover for holidays does not necessarily mean you may run the business remotely on a permanent basis.

Also check any restrictions on outside work. Does the clause cover only competing activities, or does it also extend to an existing part-time job, an interest in another business or occasional consultancy work? Have permitted activities specified as clearly as possible. Any requirement for prior approval should be linked to clear criteria, rather than leaving your future career plans entirely uncertain.

4. Test your operating plans against the contract

Before buying, work through three scenarios: normal day-to-day operations, an unexpected short absence and an extended absence. For each one, note who will make decisions, who has the required qualifications and what approval is needed.

Here is a simple practical test: you want to buy a business while continuing to do other work on certain days. Your plan includes appointing an experienced manager. If the contract requires you to devote all your working time and effort to the business, your operating plan and the draft agreement do not yet align. That gap needs to be resolved before you sign.

Consider the financial implications too: anyone providing cover must have time available and will need to be paid. Conversely, budgeting for a manager’s salary does not, in itself, mean the contract allows you to appoint one.

Practical takeaway: Only buy a franchise whose personal involvement requirements match your actual availability. Make sure the rules on personal attendance, permitted outside work and management cover are clearly set out, and have the final clauses reviewed by an independent legal adviser.