Pre-contractual information obligations of franchising in Germany

published on 14 May 2025 | reading time approx. 5 minutes

Franchising has established itself as a popular business model in Germany, offering numerous opportunities for both franchisors and franchisees. However, these opportunities are also accompanied by specific legal obligations – particularly with regard to pre-contractual obligations. In particular, the franchisor's pre-contractual duties of disclosure present hurdles that should not be underestimated in practice.

This article is part of the article series “Franchising”. It is a cross border collaboration and is intended to highlight the key elements of a franchising agreement in selected countries. To the article series “Franchising” »

Pre-contractual duties of disclosure and information »
Modalities of the information obligations »
Legal consequences of a breach of the information obligations »
Practical tips for franchisors and franchisees »
Conclusion »

Pre-contractual duties of disclosure and information

Pre-contractual obligations in franchising are primarily characterised by the principle of good faith (Section 242 BGB), culpa in contrahendo (culpa before or at the conclusion of the contract, Sections 311 (2) Nos. 1 and 2, 241 (2) BGB) and case law; there is no special statutory regulation in Germany. Accordingly, franchisors are obliged to provide potential franchisees with comprehensive information on all material aspects of the franchise agreement. These duties of disclosure are not only of a moral nature, but are also legally binding.

The specific duty of the franchisor to provide information is determined by the circumstances of the individual case. In particular, the experience and knowledge of the franchisee and the course of the business initiation are decisive. This means, for example: If an inexperienced franchisee is involved, the franchisor's obligations to provide information and clarification are correspondingly more extensive than if an experienced franchisee is involved.

In principle, however, the franchisor must provide the franchisee with the following information, among others; the scope of the specific information depends on the individual case as described above:

Structure and operation of the franchise system: The advantages of the franchise distribution model for the franchisee lie precisely in being able to utilise the franchisor's proven expertise and brand. The franchisor must therefore provide information that contains the relevant information about the business model, the products and the marketing strategies.
Financial information: The franchisor is obliged to provide the franchisee with a realistic assessment of the expected investments, running costs and potential income. This also includes information about the franchisor's financial situation. In principle, the financial information communicated must not merely be an estimate, but must be based on a careful case-by-case assessment by the franchisor. If financial information must nevertheless be estimated due to a lack of sufficient evidence, the franchisee must be informed of this.

If the forecasts subsequently turn out to be incorrect, this does not constitute a breach of disclosure; rather, in such a case, the basis on which the forecast was made must be examined. However, this does not, of course, constitute a licence to lie; in principle, the information provided to the franchisee must be accurate.
Legal information: The franchisor must inform the franchisee of any legal framework relevant to the operation of the franchise, including applicable laws and regulations.

Modalities of the information obligations

The information obligations must be fulfilled in a clear and comprehensible form. The franchisor should ensure that all information is provided in good time before the contract is concluded in order to give the franchisee the opportunity to review it and seek legal advice if necessary.

Time of clarification: In principle, there is no fixed time at which the required information must be provided. Nevertheless, the required information must be provided within a reasonable period of time before the contract is signed. In practice, it has become clear that the relevant information should therefore be provided no later than two weeks before the contract is concluded.
Confidentiality: The franchisor should ensure that its business secrets are protected. To this end, they should agree a sufficient confidentiality agreement with the franchisee before disclosing sensitive and potentially valuable information about their franchise system.
Form: There is no formal obligation. However, the franchisor bears the burden of proof that it has fully and correctly informed the franchisee; for reasons of proof, the information provided should be well documented (e.g. through minutes of meetings or signed checklists). In practice, a so-called franchise handbook, in which the necessary information can be collected and organised, has become established as a form for the transfer of knowledge.

Legal consequences of a breach of the information obligations

A breach of the pre-contractual duties of disclosure and information can have considerable legal consequences. Among other things, the franchisee could claim damages if they have suffered a financial disadvantage due to inadequate information. The franchisee may even be able to contest the franchise agreement if they can prove that they made a decision based on incorrect or insufficient information that they would not have made had they been fully informed.

Practical tips for franchisors and franchisees

Taking the above into account, the franchisor is therefore recommended to communicate transparently with the franchisee in order to fulfil the duty to provide information. For evidence purposes, the communication fulfilling the obligations should be documented. In addition, care should be taken to ensure that contractual "accessories", such as confidentiality agreements, are agreed accurately and in good time.

The franchisee, on the other hand, is advised to thoroughly check all information provided by the franchisor and to scrutinise it if it is unclear – because the answers to be provided must be accurate. After all, the economic and strategic future of the franchisee depends on the information based on this information.

Conclusion

Pre-contractual obligations in franchising are crucial to the success of the franchise system and the protection of the interests of both parties. Franchisors must ensure that they fulfil their information obligations in order to avoid legal consequences. Franchisees should be aware of their rights and obligations and check all information carefully before signing a contract. A franchising model that is transparent (even before the contract is signed) can not only avoid legal disputes, but also promote a successful and long-term business relationship.