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Franchising can be a powerful route for scaling a business internationally, especially across the diverse markets of the European Union. The EU’s single market of 27 countries (450 million consumers) hosts around 8,500 distinct franchise brands, far more than the ~2,500 found in the United States. This growth comes with a challenge: Europe has no single franchising law, meaning each country imposes its own legal framework. Navigating this patchwork of local laws is crucial for corporate decision-makers and entrepreneurs planning to expand via franchising in Europe. Understanding Local Legislation in EU Markets No Unified EU Law – Know the National Rules: Unlike the U.S., which has federal franchise regulations, the EU lacks an overarching franchising statute. Each member state regulates franchising through its national laws (general contract, commercial, and competition laws, or specific franchise statutes). In-depth knowledge of each target country’s regulations is therefore essential for success. The absence of uniform rules means franchisors must adapt to varying definitions, requirements, and restrictions in each jurisdiction. National Franchise Laws – Key Examples: Many EU countries impose their own franchise-specific legislation or case-law principles, which can significantly impact how you operate The key we found most useful is our broad network of collaborators who can assist with local counsel in each country early. Laws can differ on defining a franchise, what must be disclosed, relationship terms, and even whether agreements need to be in the local language. Thoroughly researching local legislation (or hiring experts who know it) will help avoid violating local rules that could derail your expansion. It is important to mention that what “works” in one country might be illegal or unenforceable in another – franchising in Europe is not one-size-fits-all. Drafting Franchise Agreements Tailored to Each Jurisdiction Avoid the Copy-Paste Trap: When expanding internationally, franchisors cannot simply reuse their domestic franchise contract and assume it will hold up everywhere. Localized drafting is crucial. Franchisors who assume one standard agreement is “equally enforceable everywhere” may face a nasty surprise. Instead, tailor your franchise agreements to reflect each jurisdiction’s legal requirements and business norms. Key Considerations in Localizing Contracts: When drafting country-specific franchise agreements, the following factors are very important: Mandatory Legal Provisions: Country-specific clauses required by law must be included. For instance, French franchise contracts should explicitly grant trademark usage rights and include know-how transfer (as noted for the Loi Doubin definition). Italian agreements must respect the 3-year minimum term and include explicit territory and royalty details. Failing to include such terms can make the agreement non-compliant or even void in those jurisdictions. Disclosure and Waiting Periods: The contract signing timeline must aligns with local disclosure laws and cooling-off periods. If a jurisdiction requires a 30-day disclosure period (like Italy) or a 20-day cooling-off period (like France and Spain), the timelines must be built acordingly into the contract process. Language and Cultural Fit: While many international franchise contracts use English, it could be necessary to translate the agreement or key parts into the local language. Many franchisees (and the courts) will expect the contract in their native language and governed by local law. A contract not understood by the franchisee or not in the required language could be challenged. Choice of Law & Forum: Specify governing law and dispute forum in each contract. Many franchisors default to their home country’s law for consistency; however, this may not override certain mandatory local laws designed to protect franchisees. Some countries’ franchise laws or public policy will impose local law or jurisdiction for certain matters despite what the contract says. Ensuring Contract Enforceability Across Borders Having a contract is one thing; being able to enforce it in a foreign jurisdiction is another. To maximize the likelihood that the franchisor rights (and remedies) can be upheld internationally, the following strategies should be considered: Governing Law vs. Local Law: Under EU rules (the Rome I Regulation), parties generally can choose the law governing their contract. Many franchise agreements pick the franchisor’s home law for consistency. However, this choice cannot override certain mandatory local laws enacted to protect franchisees or business dealings in that country. For example, if French law grants a franchisee certain non-waivable rights, a clause saying the contract is governed solely by U.S. law won’t strip the French franchisee of those protections. To ensure enforceability, either the contract must comply with those local mandatory rules regardless of the chosen law, or explicitly acknowledge them in the contract. Jurisdiction and Venue: Clearly state which courts (or arbitral tribunals) will handle disputes. The Brussels I Regulation in the EU generally upholds exclusive jurisdiction clauses between businesses, and a judgment from one EU country is directly enforceable across all EU member states. This means that if the franchisor obtains a court judgment in France against a franchisee, it can be enforce in Germany or Italy relatively easily via EU mechanisms. Alternatively, some franchisors opt for international arbitration as the dispute forum – arbitration awards can be enforced globally under the New York Convention, and it avoids any home-court advantage for either side. Compliance with Disclosure and Registration Requirements One of the most distinctive legal aspects of franchising is the requirement in many jurisdictions that franchisors disclose certain information to prospective franchisees before any agreement is signed or payment made. In the EU, disclosure rules vary by country, so compliance is a moving target. Key points include: Pre-contractual Disclosure Documents: A number of EU countries have laws compelling franchisors to provide a detailed information document to the potential franchisee well in advance. This often includes information about the franchisor’s business, financial status, the franchise network, intellectual property, fees, training and support provided, and other key terms. For example, France’s Loi Doubin requires a disclosure document (DIP) be given at least 20 days before signing the contract Italy similarly mandates a disclosure document 30 days before contract signing by com. Spain imposes at least 20 days between providing a full draft contract and signing, effectively a cooling-off periodfranchising.eu. Belgium, Sweden, Romania and several other countries also enforce pre-contract disclosure by statute. Failing to comply can have serious consequences – the franchisee may be able to void the contract or even claim damages if misled. Registration Requirements: While most EU countries do not require franchisors or franchise offerings to be registered with the government, a few do (or did in the past). For instance, Lithuania requires that the franchise agreement be registered in the Register of Legal Entities where the franchisor’s or franchisee’s business is registered. Managing Intellectual Property and Brand Control Across Borders The franchise’s value is inseparable from its brand – trademarks, logos, know-how, and the consistent customer experience that is offered. As one franchising expert noted, franchise systems “stand or fall on the reputation of their brands and the quality and consistency of their product and service offerings”. When expanding into multiple EU countries, protecting the intellectual property (IP) and maintaining brand consistency is paramount and the following are essential: Securing the Trademarks in the envisioned teritory. Clear License of Rights in the Franchise Agreement Maintain Quality Control to protect the brand’s reputation. Protect Know-How and Trade Secrets. Brand Adaptation vs. Consistency: While consistency is crucial, franchisors should also think about local cultural and legal adaptation of the brand where necessary. Important Aspects that can generate risk Choosing the wrong franchisee or master franchise partner can lead to conflicts, underperformance, or worse, legal battles. Distant franchisees are harder to monitor – as one expert put it, the “tyranny of distance, time zones, [and] cultural differences” can combine to increase risks and reduce control for the. The implementation of a rigorous franchisee selection and training process is very important. It is importnat not to rush into partnerships just for quick expansion – it must be ensured that the franchisee understands the franchise system and is financially and operationally capable of executing it. Maintaining regular communication and providing strong ongoing support can preempt many issues. In some cases, using area developers or joint venture models can give a local partner with “skin in the game” to help oversee units in a region, adding an extra layer of control and insight. A franchisee might misuse the brand (e.g. deviating from standards or using the trademark beyond the scope of their license), or third parties might copy the concept once it becomes popular in a new country. It is important to actively monitor the franchisees for compliance with brand standards. If a franchisee strays, address it immediately as per the contract (e.g. send notices of default, require them to cure deficiencies within a set time). For outside infringement (e.g. a copycat store or a confusingly similar brand popping up), work with local IP counsel to send cease-and-desist letters and take legal action if needed. Registering the IP (trademarks, copyrights for manuals or designs, etc.) in each jurisdiction before or as it is entered it is critical to being able to enforce the rights there. Enforcing Post-Termination Obligations: One risk area is when a franchise relationship ends. Will the franchisee actually cease using the brand and return confidential materials? Will they respect the agreed post-term non-compete period? To mitigate post-termination risks, it must be ensured that the contract gives the rights to take swift action – for instance, the right to enter the former franchisee’s premises to remove signage and branded materials, or clauses that allow injunctive relief if the franchisee doesn’t stop operating or violates non-compete terms. In the EU, courts can and do grant injunctions to enforce non-competes or IP rights quickly when necessary. Plan for the worst-case scenario in the contracts so you have the tools to protect the system if a franchisee goes rogue after termination. Conclusion Expanding a franchise into multiple countries is a complex endeavor, but with careful legal planning it can be hugely rewarding. With the right preparation and advice from experienced counsel, international legal landscape can be confidently navigated and the business can be scaled with success.  

Court cases brought between 2019-2023 before the Court of Justice of the European Union (“CJEU”) having intellectual property as the subject matter ranked second in terms of their total number (after those involving freedom, security and justice). Navigating the vast IP ocean, one recent case stood out in particular (Case C-227/23 – Kwantum Nederland and Kwantum België[1]), insofar as it involved a potential conflict of laws between EU and the international laws. The conflict was eventually settled by CJEU’s binding decision as of 24.10.2024. By upholding the very principles of EU law, CJEU has opened the door wide for international creators of works of applied art[2] who will now enjoy sufficient protection for their works within all the EU member states. 1.Facts The smallest snowflake can cause the greatest avalanche. This is also the situation in the present case, where the avalanche effect was produced by perhaps nothing more thrilling than a... chair. But an admirably crafted one. Vitra Collections AG (“Vitra”), a company incorporated under Swiss law, produces designer furniture, in particular chairs, including the well-known Dining Sidechair Wood (“the DSW chair”), designed in 1948 by the now deceased couple Charles and Ray Eames, who were citizens of the United States of America. In the Netherlands and Belgium, Kwantum Nederland BV and Kwantum België BV, two businesses operating under Dutch law (“Kwantum”) run a chain of stores that offer furniture and other household goods. In 2014, Vitra discovered that Kwantum had been selling and promoting a chair under the name “Paris”, which allegedly violates its copyright for the DSW chair. In this context, Vitra brought an action before the Dutch courts with the aim, among other things, of stopping the sale of the Paris chair. In first instance, the District Court of Hague held that Kwantum did not infringe Vitra’s copyrights and that it did not act unlawfully by selling the Paris chair and, consequently, rejected Vitra’s applications for the protection of its own IP rights on EU territory. The first court's judgment was overturned by the Court of Appeal of Hague, which considered that Kwantum did infringe Vitra’s copyrights on the DSW chair and that the chair itself was eligible for copyright protection on EU territory. Further appeals were subsequently lodged by the parties before the Supreme Court of the Netherlands, which reached an impasse on the interpretation and complementarity of the provisions of Dutch copyright law with those of international law. Thus things stand, the Supreme Court decided to stay the proceedings and to refer to the CJEU for a preliminary ruling, mainly requesting the EU court to offer guidance regarding the protection that may be given in the European Union to works of applied art originating in a third country, when the creator of the work is not a citizen of a Member State. 2.The material reciprocity clause - Berne Convention De jure, given the DSW chair's USA “citizenship”, the key element in understanding the CJEU's ruling in the above-described case is the understanding (and potential applicability) of the reciprocity clause contained within the Berne Convention[3]. The Berne Convention establishes a general principle of “national treatment”, wherein authors originating from the signatory states of the Convention are entitled to the same intellectual property rights in another signatory state as that state’s own citizens or residents would be entitled to. However, Article 2(7) of the Convention creates an exception which applies both to works of applied art, and to industrial designs and models – the first category being of interest to the present case. In the specific cases involving these categories of creations, the Convention requires that the material reciprocity test is to be carried out in order to assess the level of protection that is to be granted to such creations. The material reciprocity test implies that if the laws of the country of origin of a work provide protection solely under industrial design or model laws (rather than copyright law), other signatory states are not obligated to extend copyright protection beyond what is recognized domestically. To put it briefly, copyright protection is of a limited nature as regards works of applied art that are not protected in their author’s country of origin, thus allowing other signatory states to refuse to grant greater copyright protection. It is not disputed that, under Dutch copyright law, the work in question would qualify as a work of applied art. Nor is it disputed that, in accordance with Article 5(4) of the Convention, the U.S. is the country of origin of the work. However, in the Dutch courts, the parties disagreed on whether, considering the state of harmonised copyright law, the court should apply the reciprocity test[4]. Under U.S. law, works of applied art can receive copyright protection if their artistic elements are separable from functional aspects. For example, while the structural function of a chair is not copyrightable, unique sculptural features that don't impact function (like the DSW chair's distinct design and its specific processing of raw materials) may qualify for copyright. By (hypothetically) performing the material reciprocity test, it would be concluded that if a country (like the U.S.) only protects certain applied art as designs (and not under copyright), other signatory states are not obligated to provide copyright protection for those works. The applicability of this clause is critical in the case at hand because it questions whether EU Member States (or the EU legislature itself) can limit protection for the DSW chair based on the type of protection it receives in the U.S. Consequently, it follows that the case at hand raises significant questions as regards the copyright protection enjoyed throughout the EU territory in respect of works which do not originate in the EU. The answer given by the CJEU will thus have profound implications for the harmonization of copyright protections across jurisdictions. 3.CJEU Judgement. Importance In its decision, the CJEU stated that Member States cannot apply a material reciprocity criterion for works of applied art originating from third countries, such as the U.S., based solely on the protections available in those countries, as would be required under the reciprocity clause. Furthermore, the EU Court clarified that only the EU legislature itself can decide if, and to what extent, copyright rights might be limited within the Union. In short, the decision signals that neither the place where a work of applied art was created, nor the nationality of the creators themselves is of any relevance, since, due to the protection provided under EU rules, they are equally protected in any of the EU Member States. The CJEU decision finds itself in complete harmony with Advocate General Szpunar's view[5], which found on 5 September 2024, in its groundbreaking Opinion, that the protection offered by the EU legal framework to works of applied art also extends to those residing in third countries. In terms of importance, the CJEU's decision appears to be fundamental for protection of the IP rights across the European area, because it reinforces the EU's commitment to unified copyright standards, holding firm against external influences and ensuring a cohesive, fair environment for creative rights across all Member States. Consider an example involving a Japanese artist whose mural is protected only as an industrial design in Japan. Under the CJEU's decision, if this mural is displayed in the EU, it will receive full copyright protection, unaffected by Japan’s more limited protection. This ruling establishes that EU Member States must consistently apply EU copyright standards, regardless of the work’s origin or the creator’s nationality, ensuring a harmonized legal framework for intellectual property rights within the EU. Given all of the above, one can only imagine that the worldwide creative community will be more than eager to learn about the significance of the CJEU's decision delivered in the case discussed in the present article. Authored by Patricia Gorici, Associate Irina Vasile, Partner *** For any IP-related inquiries, applications or disputes – regardless of the place of creation or the nationality of the creator – Lexters professionals are skilled with all the necessary expertise to deliver results of the highest quality for both national and international clients. Do not hesitate to contact us should you be in need of any assistance, representation or simply answers to your own questions. [1] The complete decision can be accessed here. [2] Works of applied art = works that apply design and decoration to everyday and essentially practical objects in order to make them aesthetically pleasing. [3] Berne Convention for the Protection of Literary and Artistic Works, adopted in 1886, deals with the protection of works and the rights of their authors. It is administered by the World Intellectual Property Organization and has so far been ratified by 181 states worldwide, including the 178 UN member states. It provides creators with the means to control how their works are used, by whom, and on what terms. It is based on three basic principles and contains a series of provisions determining the minimum protection to be granted, as well as special provisions available to developing countries that want to make use of them. Berne Convention can be accessed here. [4] M. Eechoud, A. Metzger, J. P. Quintais, O.A. Rognsta, Opinion of the European Copyright Society on Certain Selected Aspects of Case C-227/23, Kwantum Nederland and Kwantum Belgie, IIC - International Review of Intellectual Property and Competition Law, 2024.   [5] Opinion of Advocate General Szpunar in Case C‑227/23, delivered on 5 September 2024, can be accessed here.