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Enter into a franchise partnership

Whether you as a franchisor, or a franchisee, are to enter into a partnership for a new franchise, it is essential that both parties make a decision about a partnership on a well-informed basis.

In Sweden, this is regulated by law (Act on Franchisor's Information Obligation). The purpose of the law is, among other things:

Making it possible to establish franchise on a well-informed basis
To protect franchisees in what is considered to be an unbalanced contractual relationship
To reduce the risk of less suitable persons/companies entering into a franchise partnership

The law indicates a number of points about which the franchisor is obliged to provide information. Although the law only applies to Sweden, these points make sense to consider in other jurisdictions as well. It is important to ensure that the information is clear and understandable and should at least contain:

A description of the franchise business that the franchisee will operate
Information on other franchisees with whom the franchisor has entered into agreements within the same franchise system and the scope of their activities
Information on the remuneration to be paid by the franchisee to the franchisor and other financial conditions for the franchising activities
Information about the intellectual property rights (trademarks, concept elements, etc.) that the franchisee can and shall use
Information about the goods and services that the franchisee is obliged to purchase or rent
Information about any competition ban that will apply during and/or after the agreement period for the franchise agreement
Information on the term of the franchise agreement, conditions for modifications, extension and termination of the franchise agreement, as well as the financial consequences of a termination
Information about how a dispute between the parties is to be settled and what applies in relation to who is responsible for the costs of a dispute

The information should be provided before the parties enter into a franchise agreement and otherwise prepare for an agreement to be concluded.

Contact us for a non-binding conversation and we can review the decision basis, framework, prerequisites and conditions for a franchise partnership, before you sign.