Compensation for the Franchisee

In the last years a lot of decisions in Germany have revolved around the issue of compensation of the franchisee once the franchising agreement ends.

It´s often the case that franchisor takes over the business of the franchisee and therefore profits of the established customer base. The question in place is, if the rules of the regime under which commercial agents are regulated can be applied by analogy to franchisees, since that would mean that under certain conditions the franchisor has to compensate the franchisee for the takeover of the customer base.

So far the courts have avoided to directly decide this issue and ruled that an essential requirement for such an analogy would be the integration in the sales organization of the franchisor. As long as the franchisee isn´t closely incorporated in the organization of the franchisor there is no base for a compensation.

However, both parties would be well advised to agree on terms and conditions for a potential takeover beforehand in the franchise agreement.

source: https://www.zchlegal.cz/en/blog/compensation-for-the-franchisee

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