Franchise agreements: check withdrawal rights before launch

If you are expanding an existing business into a franchise network in Germany, you will usually plan signing, training and opening as a fixed sequence. However, a potential statutory right of withdrawal can change that timetable. A separate review is particularly worthwhile where an individual is entering self-employment through the franchise. It helps prevent services, deliveries and payments from starting before the parties’ legal commitments are sufficiently clear.

1. Withdrawal is not the same as termination

Termination ends a contractual relationship under the applicable statutory or contractual rules. Withdrawal, by contrast, concerns whether a party remains bound by their declaration of agreement. If a statutory right of withdrawal exists and is validly exercised, a key question is which benefits already received must be returned.

For planning purposes, this means that a long contract term or a clause excluding ordinary termination does not settle the question of withdrawal rights. Nor does describing the franchisee as an ‘independent business owner’ remove any statutory right that may exist.

Germany has no dedicated franchise legislation. The main applicable rules are those of the German Civil Code (BGB), alongside the German Commercial Code (HGB), where relevant, and competition and antitrust law. When assessing withdrawal rights, the BGB provisions on certain financing and supply agreements and the protection of people starting a business are particularly relevant.

There are also pre-contractual disclosure duties, arising in particular from sections 311(2), 241(2) and 242 BGB. Disclosure and notice of withdrawal rights are separate requirements: a detailed explanation of the business concept does not replace a required withdrawal notice. The franchise sector’s code of ethics, meanwhile, is a self-regulatory instrument, not a separate law governing withdrawal rights.

2. Assess the contracting party and purchasing obligations together

Not every franchise agreement carries a right of withdrawal. What matters is who is entering into the agreement, why they are doing so and what the parties have agreed to provide. Have all mandatory ancillary agreements reviewed, not just the main contract.

An important starting point is section 510 BGB, which covers instalment supply agreements. These can include, for example, agreements for the regular supply of goods of the same kind or commitments to purchase goods repeatedly. A corresponding purchasing obligation within a franchise agreement may therefore require an assessment of withdrawal rights. Ongoing franchise fees alone, however, do not automatically turn an agreement into this type of goods supply contract.

Section 513 BGB extends certain protections to individuals acting to establish a trade or self-employed professional activity. Statutory limits and exceptions apply, including those relating to the relevant monetary amount. The assessment therefore requires specialist advice and cannot be based solely on the size of the initial franchise fee.

For each proposed franchise relationship, record at least the following:

• Contracting party: Is the signatory an individual or, for example, a GmbH, a German limited liability company?
• Purpose of the venture: Are they starting a self-employed business or expanding an existing enterprise?
• Purchasing obligations: What recurring purchases does the full package of agreements require?
• Financing: Are you also providing a loan, deferred payment terms or other financial assistance?
• Linked agreements: Which supply, equipment or financing agreements are connected to the franchise agreement?

For example, a concept requiring regular purchases of goods calls for a different assessment from a purely service-based concept with no goods purchasing obligations. That does not determine the outcome, but it does make clear what needs to be reviewed.

3. Create a dedicated process for notices and signing

If the legal review identifies a right of withdrawal, you need a contract-signing process that accommodates it. A generic template taken from another type of contract is not a reliable solution. In particular, rules governing online consumer purchases should not be applied to a franchise start-up without first checking whether they are relevant.

Establish which withdrawal notice is required, which documents must be provided and when the withdrawal period actually begins. The standard statutory withdrawal period is generally 14 days, but its start depends on the applicable legal requirements. Do not automatically count from the date of signature.

A central contract file is useful in practice. It should contain the final agreement, its schedules, the withdrawal notice and verifiable evidence that the documents were provided. Sales staff should use only approved documents and should not add their own wording, such as ‘no right of withdrawal’.

If the contracting party changes before signing, or a goods purchasing agreement is added, the assessment must be repeated. Also record who is responsible for internal approval. This prevents the issue of withdrawal rights from being passed between sales, administration and legal advisers without anyone retaining responsibility.

4. Authorise the start of services and deliveries separately

Keep contract signing organisationally separate from the start of costly activities. Set clear rules on when training places may be firmly booked, equipment ordered, access set up and goods delivered. This is not a blanket statutory waiting requirement, but a precautionary risk-management decision.

If services or deliveries are to begin earlier, have the consequences assessed first. An early start or a declaration by the franchisee does not automatically extinguish a right of withdrawal. Nor should you assume that initial franchise fees or costs already incurred can always be retained following withdrawal.

Finally, designate a team or contact responsible for receiving withdrawal notices. They should preserve a record of receipt and the notice’s contents, stop further avoidable expenditure, and coordinate the legal assessment and any necessary unwinding of the agreement.

Practical takeaway: Add three mandatory checkpoints to your franchise launch plan: identify any withdrawal rights, provide the required documents correctly, and authorise the start of services and deliveries separately. This gives both sides of your franchise network greater certainty.