Operating a franchise in Germany

Germany’s franchise sector is thriving, reflecting both the strength of its economy and the adaptability of its legal and business frameworks. With a GDP of approximately US$4.71 trillion, Germany ranks among the world’s largest economies. Within this robust economic landscape, franchising has emerged as a dynamic and steadily growing segment, contributing significantly to employment, entrepreneurship and innovation.

While Germany does not have specific franchising law, there are a number of codes and practices that individuals and businesses must abide by. Additionally, the German Franchise Association (GFA) provides a code of ethics that outlines best practices for franchisors and franchisees. While not legally binding, it is widely respected and used in disputes.

Read more on international franchising

• Operating a franchise in the UK
• Operating a franchise in France
• Operating a franchise in Ireland
• Operating a franchise in Luxembourg
• Operating a franchise in Spain
• Operating a franchise in the Netherlands
• Operating a franchise in South Africa
• Operating a franchise in China
• Operating a franchise in Singapore
• Operating a franchise in Australia
• Operating a franchise in the UAE
• Operating a franchise in Saudi Arabia
• Operating a franchise in Qatar

In 2023, the approximately 910 active franchise systems in Germany, along with their approximately 147,030 franchisees and over 830,000 employees, generated a total revenue of €147 billion, according to the GFA. The association also found that sales rose in 2022 by almost 5%, to €142bn. Since 2015, revenues in the franchise sector have increased by more than 40%.

The service sector retains the top spot, with 48%. In second place is gastronomy and leisure, with 19%. Trade places below them at 19% and craft, with 14%, remains fourth.

Structure  

Both franchisors and franchisees enjoy flexibility in choosing their business structures. Common forms include GmbH (limited liability company) and AG (stock corporation) for franchisors, and sole proprietorships, partnerships or GmbHs for franchisees. There are no nationality or residency requirements, making Germany an attractive destination for foreign franchise brands.

Contractual norms and competition law 

Franchise agreements in Germany typically span five to 20 years. Any renewal clauses included in these agreements must be fair and not disadvantage franchisees.

Non-compete clauses are permitted during and after the franchise term, provided they are reasonable in both scope and duration – usually capped at one year post termination – and comply with competition law.

German competition law prohibits franchisors from imposing fixed or minimum resale prices, though recommended pricing is allowed. This ensures franchisees retain autonomy in pricing decisions, fostering competitive practices.

Disclosure and registration  

Germany does not impose a formal disclosure resume specific to franchising. However, under the German Civil Code (BGB), franchisors must disclose all relevant information before contract signing. While there is no mandatory format or registration requirement, providing German language documents is strongly advised to ensure clarity and avoid disputes.

Intellectual property

IP protection for franchises in Germany can be obtained through different routes. First, trademark protection is available. This includes registered trademarks - different forms are available, such as word, device, logo, 3D, storefronts and smell - and unregistered trademarks that have become known through use. Name rights can also apply. 

Second, design right protection is available for specific elements, which includes products but may also include certain font types or colour concepts. Both design rights and trademarks are available on a national level but also on an EU wide level and can also be obtained through use. Beside these, protection against copying concepts or elements, such as the look and feel of a product, is granted to some degree through unfair competition law.

Beside trademark protection, German law provides for the efficient protection of trade secrets This includes business-critical confidential information, know-how, recipes, formulas, marketing concepts and license rates. These protections may also apply for patents, for instance if there is a specific machine required, and copyright, which includes protection of software. Beside these statutory rights, contractual restrictions are possible to a wide degree but are often limited by the principle of good faith and antitrust laws.

Enforcement is usually done via out of court negotiations and warning letters as a first step, which are combined with cease-and-desist undertakings which have to feature a contractual penalty. If necessary, disputes can escalate to interim injunctions or full proceedings, both of which are generally efficient in terms of time and cost. Interim injunction proceedings are most common, and decisions can be granted within a few weeks or even days.