{"id":114382,"date":"2025-10-09T13:37:36","date_gmt":"2025-10-09T13:37:36","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=114382"},"modified":"2025-10-09T13:37:36","modified_gmt":"2025-10-09T13:37:36","slug":"denmark-franchise-licensing","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/denmark-franchise-licensing\/","title":{"rendered":"Denmark: Franchise &amp; Licensing"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-114382","comparative_guide","type-comparative_guide","status-publish","hentry","guides-franchise-licensing","jurisdictions-denmark"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Bech-Bruun<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2023\/01\/Firm-logo-BechBruun_Legal50036871165.1.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Bech-Bruun<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2023\/01\/Firm-logo-BechBruun_Legal50036871165.1.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Franchise &amp; Licensing laws and regulations applicable in Denmark<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a legal definition of a franchise and, if so, what is it?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no legal definition of a franchise under Danish law.<\/p>\n<p>A franchise is traditionally understood as a form of business in which a franchisor, who has established a successful business concept, enters into a contractual relationship with a franchisee, who wishes to operate a business under the franchisor\u2019s trade name, trademarks and business system. The franchisor offers guidance on the use of the business system in exchange for payment of royalties.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any requirements that must be met prior to the offer and\/or sale of a franchise? If so, please describe and include any potential consequences for failing to comply.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any registration requirements for franchisors and\/or franchisees? If so, please describe them and include any potential consequences for failing to comply. Is there an obligation to update existing registrations? If so, please describe.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements (franchise specific or in general)? If so, please describe them (i.e. when and how must disclosure be made, is there a prescribed format, must it be in the local language, do they apply to sales to sub-franchisees) and include any potential consequences for failing to comply. Is there an obligation to update and\/or repeat disclosure (for example in the event that the parties enter into an amendment to the franchise agreement or on renewal)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no formal disclosure requirements under Danish law, neither franchise specific nor in general. However, in general, the principle of culpa in contrahendo and the obligation of good faith make disclosure of certain information prior to the conclusion of the franchise agreement advisable. The franchisor may choose to disclose certain information about e.g., profitability, material litigation, scope of an existing franchise network and status of trademark applications.<\/p>\n<p>In general, the franchisor is subject to a duty of loyalty after which the franchisor must disclose material commercial information about the franchise. If the franchisor fraudulently sets aside its duty of loyalty, the franchise agreement may be declared invalid. It may also constitute af breach of the franchise agreement which entitles the franchisee to remedies for breach.<\/p>\n<p>In the event of a breach of contract, the franchisee is entitled to claim damages if (i) there is a basis of liability for the franchisor, (ii) the franchisee has suffered a loss, (iii) the loss is foreseeable, and (iv) there is a causation between the breach of contract and the loss suffered.<\/p>\n<p>A pre-contractual liability additionally requires clear unfair conduct or a breach of the pre-contractual rules and principles. Damages can thus be claimed for the loss and expenses incurred in connection with the conclusion of the agreement, and the franchisee will be financially compensated as if no agreement had been entered into.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If the franchisee intends to use a special purpose vehicle (SPV) to operate each franchised outlet, is it sufficient to make disclosure to the SPVs\u2019 parent company or must disclosure be made to each individual SPV franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no formal disclosure requirements under Danish law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What actions can a franchisee take in the event of mis-selling by the franchisor? Would these still be available if there was a disclaimer in the franchise agreement, disclosure document or sales material?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Even though there are no formal or legal disclosure requirements prior to the conclusion of the franchise agreement, the franchisor\u2019s mis-selling of substantive information may entitle the franchisee to nullify the franchise agreement depending on the type of misrepresentation.<\/p>\n<p>Furthermore, the franchisee may initiate legal proceedings claiming reimbursement or damages.<\/p>\n<p>The principle in Danish contract law is the principle of freedom of contract, and it is therefore binding and valid to use disclaimers. However, the principle of freedom of contract is not unlimited, and disclaimers must not be abused to achieve unfair results. To avoid unfair terms, Danish courts use various tools:<\/p>\n<ul style=\"padding-left: 0\">\n<li>The disclaimer will not be considered agreed upon between the franchisor and franchisee if the disclaimer is not clear enough for the franchisee to have subjective knowledge of the disclaimer. The more onerous the disclaimer, the greater the requirements for its adoption.<\/li>\n<li>The disclaimer will typically be interpreted restrictively, and an unilateral disclaimer will, in case of ambiguities, be interpreted against the drafting party.<\/li>\n<li>Ultimately, the courts can declare an unfair disclaimer invalid pursuant to section 36 of the Danish Contracts Act.<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Would it be legal to issue a franchise agreement on a non-negotiable, \u201ctake it or leave it\u201d, basis?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Under Danish law, it is legal to issue a franchise agreement on a &#8220;take it or leave it&#8221; basis where the terms are non-negotiable. The franchisee is free to accept the terms and enter into the agreement or reject the terms and not enter into the agreement.<\/p>\n<p>However, the agreement must still comply with general contract law rules, including rules on unfair terms, the obligation of good faith, and the duty of loyalty as described above. If the agreement contains terms that are considered unfair or contrary to the obligation of good faith, they may be set aside by the Danish courts.<\/p>\n<p>The courts may take into account if the franchisor has had a disproportionately large advantage in being able to unilaterally determine the terms of the agreement without the possibility of negotiation. This will affect the courts&#8217; assessment of whether the terms are fair if the franchisee has had a significantly weaker bargaining position and has been \u201cforced\u201d to accept the terms without any real opportunity for negotiation.<\/p>\n<p>Therefore, it should be noted that although a &#8220;take it or leave it&#8221; agreement can be legal and valid, certain terms in the agreement may still be challenged if they are considered to be unfair.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are trademarks, know-how, trade secrets and copyright protected in your country?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Trademarks:<\/p>\n<p>Pursuant to the Danish Trademark Act, trademarks can be protected either by registration with the Danish Patent and Trademark Office or through continuous use of a particular mark in the course of trade when the trademark has a distinctive character.<\/p>\n<p>The protection grants the holder exclusive rights to use the trademark or similar trademarks in connection with the goods and services for which it is registered or used as well as similar goods and services.<\/p>\n<p>Know-how:<\/p>\n<p>Know-how is not directly protected by a specific law nor defined by statute. However, know-how can be protected as a trade secret pursuant to the Danish Act on Protection of Trade Secrets which is based on the EU Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.<\/p>\n<p>The protection of know-how typically occurs through contract where e.g. a franchisor and franchisee enter into \u00a0a franchise agreement containing detailed confidentiality provisions.<\/p>\n<p>Trade secrets:<\/p>\n<p>Trade secrets are protected under the Danish Act on Protection of Trade Secrets. The Act protects a contractual party against unlawful acquisition, use, and disclosure of trade secrets. Trade secrets are defined as information that is not generally known or easily accessible, represents a commercial value, and has been subject to reasonable measures in order to be kept secret.<\/p>\n<p>In case of infringement, the holder of the trade secrets has a six-month time limit to apply for a preliminary injunction or to initiate ordinary legal proceedings. Infringement may also lead to penalties such as fines or imprisonment for up to one and a half years.<\/p>\n<p>Copyright:<\/p>\n<p>Copyright is protected through the Danish Consolidated Act on Copyright. Copyright arises automatically when a work is created and does not require registration, notification, or any other formalities. Copyright grants the author exclusive rights to control the work, including the right to copy, distribute, amend, modify and publish the work. Protection applies to literary and artistic works, including books, music, films, software, and artworks.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any franchise specific laws governing the ongoing relationship between franchisor and franchisee? If so, please describe them, including any terms that are required to be included within the franchise agreement.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Denmark, there are no specific laws exclusively governing the relationship between a franchisor and franchisee. The franchise relationship is primarily regulated by the general principles of contract law, including the principle of freedom of contract. This means that the parties have considerable freedom to agree on the terms of their collaboration.<\/p>\n<p>However, franchise is subject to a broad range of general Danish legislation. The franchise agreement and ongoing transactions between a franchisor and franchisee must comply with legal regulations such as the Danish Marketing Practices Act, the Competition Act, the Business Lease Act, the Product Liability Act, and the Interest Act. The Danish Data Protection Act and the General Data Protection Regulation (GDPR) will also be relevant.<\/p>\n<p>Danish law does not require specific or mandatory terms in a franchise agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any aspects of competition law that apply to the franchise transaction (i.e. is it permissible to prohibit online sales, insist on exclusive supply or fix retail prices)? If applicable, provide an overview of the relevant competition laws.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are aspects of competition law that are relevant in the context of franchise.<\/p>\n<p>The European Commission and the Danish Competition Authority acknowledge that specific restrictions can be exempted from the prohibition on anti-competitive agreements as outlined in Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). Examples of such exemptions include limitations on competitors&#8217; access to proprietary know-how and non-compete clauses that are crucial for maintaining a unified identity and reputation across the franchise network.<\/p>\n<p>In the context of franchise, the Vertical Agreement Block Exemption (VBER) is particularly relevant. Some terms of a franchise agreement that are considered restrictions on competition under competition law are exempted from the prohibition on anti-competitive agreements due to the VBER. The VBER includes rules on, among other things, online sale, exclusivity, distribution systems, and pricing.<\/p>\n<p>The VBER applies if the following conditions are met:<\/p>\n<ul style=\"padding-left: 0\">\n<li>The franchise agreement must constitute a vertical agreement<\/li>\n<li>Each of the parties market shares must not exceed 30 %<\/li>\n<li>The franchise agreement must not contain so-called hardcore restrictions, and<\/li>\n<li>Provisions concerning intellectual property rights must serve as supplementary elements to the franchise agreements primary objectives and should be directly connected to the utilization, sale or resale of goods by the franchisee.<\/li>\n<\/ul>\n<p>It is not permissible to prohibit online sales, however, a franchisor is allowed to impose certain restrictions on a franchisee\u2019s online sales. Such restrictions may not effectively prevent the franchisee from using online sales as a sales channel.<\/p>\n<p>A franchisor is allowed to require that the franchisee purchases certain products from the franchisor or a supplier nominated by the franchisor, if it is necessary for the operation of a franchise system, e.g. in order to meet certain quality standards.<\/p>\n<p>A franchisor is not allowed to set binding minimum prices or fixed prices for the franchisee.\u00a0 However, recommended prices or maximum prices may be allowed, provided they do not aim to restrict competition or have the effect of doing so.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are in-term and post-term non-compete and non-solicitation clauses enforceable and are there any limitations on the franchisor's ability to impose and enforce them?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Provisions that are strictly necessary for the functioning of a franchising system are legal and enforceable. This includes in-term non-compete obligations that are necessary to maintain the common identity and reputation of the franchise network. Post-term non-compete obligations may also be legal and enforceable, provided that the duration is limited to a reasonable period after the expiry of the franchise agreement. A non-compete obligation that is limited to a maximum period of one year after the expiry of the franchise agreement is covered by the VBER as set out above in section 10, providing a presumption of legality, if the following additional two conditions are met:<\/p>\n<ul style=\"padding-left: 0\">\n<li>the non-compete is limited to the point of sale from which the franchisee has operated during the term of the agreement, and<\/li>\n<li>the non-compete is indispensable to protect know-how transferred from the franchisor to the franchisee.<\/li>\n<\/ul>\n<p>According to the Danish Act on Restrictive Employment Clauses, non-solicitation clauses are illegal and not valid. The franchisor is therefore unable to impose such clauses.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there an obligation (express or implied) to deal in good faith in franchise relationships?  If so, what practical effects does this have on the relationship between franchisor and franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. In Danish law, there is no explicit statutory obligation to act in good faith but the obligation of good faith is a general principle under Danish contract law.<\/p>\n<p>In practice, both the franchisor and the franchisee are expected to act honestly and fairly towards each other. This can affect the relationship in several ways:<\/p>\n<ul style=\"padding-left: 0\">\n<li>The parties should be open and honest during negotiations and when entering into the franchise agreement. Concealed information or misleading behaviour can be considered a breach of good faith.<\/li>\n<li>Performance of the franchise agreement: During the term of the franchise agreement, both parties should fulfil their obligations in a manner that does not undermine the rights or expectations of the other party.<\/li>\n<li>Conflict resolution: In the event of disagreements or conflicts, the obligation of good faith can be applied to find a reasonable solution that considers the interests of both parties.<\/li>\n<li>Termination of the franchise agreement: If one of the parties wishes to terminate the agreement, this should be done in a fair and reasonable manner that does not unnecessarily harm the other party. Also, the non-defaulting party has in general a duty to mitigate its losses caused by the termination\/breach of contract.<\/li>\n<\/ul>\n<p>Although there is no specific law on good faith, a lack of good faith can lead to legal consequences such as liability for damages or termination due to the breach of contract.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any employment or labour law considerations that are relevant to the franchise relationship? Is there a risk that the staff of the franchisee could be deemed to be the employees of the franchisor? What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Even though a franchise agreement generally establishes the franchisee as an independent business owner, the actual substance of the relationship is decisive \u2014 not just the wording of the franchise agreement \u2014 to decide if a franchisor has sufficient control over a franchisee\u2019s staff to be treated as an employer.<\/p>\n<p>There is a limited risk that the staff of the franchisee is to be deemed employees of the franchisor.<\/p>\n<p>The most important is that the franchisor is aware of its level of control. If the level of control reaches too far, e.g. if the franchisor unilaterally is able to decide the opening hours and the employment conditions of the staff of the franchisee, the franchise relationship may qualify as a legal employment relationship. To mitigate this risk, the franchisor can, among other things, take these steps:<\/p>\n<ul style=\"padding-left: 0\">\n<li>Clear contractual provisions: It is crucial to have clear provisions in the franchise agreement that define the relationship between the franchisor and franchisee. This includes a clear statement that the franchisee is an independent legal entity responsible for its own employees.<\/li>\n<li>Independence in operations: The franchisee should maintain a significant degree of independence in the organisation and operation of its business, including the hiring, management, and dismissal of employees. The franchisor should avoid interfering in these processes.<\/li>\n<li>Separation of roles: Ensure there is a clear separation between the roles and responsibilities of the franchisor and the franchisee. This may include the separation of financial matters, management structures, and daily operational decisions.<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a risk that a franchisee could be deemed to be the commercial agent of the franchisor? What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Pursuant to the Danish Commercial Agents Act, a commercial agent is an independent business operator who has entered into an agreement with another company (the principal) to promote the sale of the principal\u2019s goods by negotiating the sale of their goods or by entering sales agreements in the name of the principal. The commercial agent searches for potential customers and obtains offers on behalf of the principal.<\/p>\n<p>A franchisee is most often considered to be an independent distributor who purchases and sells in their own name and on their own account. The risk that a typical franchise would be deemed to be a commercial agent of the franchisor is therefore low.<\/p>\n<p>To mitigate the small risk, the franchise agreement may include provisions that explicitly state that the franchisee is not authorized to act as a commercial agent for the franchisor. The franchise agreement may specify that the franchisee operates as an independent business.<\/p>\n<p>Furthermore, the franchisee should not have the authority to enter into agreements or legally bind the franchisor towards third parties.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any laws and regulations that affect the nature and payment of royalties to a foreign franchisor and\/or how much interest can be charged? Are there any requirements for payments in connection with the franchise agreement to be made in the local currency?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no specific laws that directly regulate the payment of royalties to a foreign franchisor or the currency of the royalties. The parties can agree on the currency they wish to use. However, if the parties have not agreed on the currency in advance and the payment is to be made in Denmark, the franchisor may require for the payment to be made in the local currency.<\/p>\n<p>There is also no specific legislation regulating how much interest can be charged on payments related to a franchise agreement. However, the interest rate must be reasonable. If no interest rate is agreed upon, a statutory interest rate can be charged in accordance with the Danish Interest Act.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to impose contractual penalties on franchisees for breaches of restrictive covenants etc.? If so, what requirements must be met in order for such penalties to be enforceable?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. It is possible to impose contractual penalties on franchisees for breaches of restrictive covenants. Under Danish law, agreements, including franchise agreements, are subject to the principle of freedom of contract. Therefore, there are generally very few restrictions on provisions in franchise agreements, as long as they are not deemed unfair.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What tax considerations are relevant to franchisors and franchisees? Are franchise royalties subject to withholding tax?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Danish tax system differentiates between companies and individuals that are tax resident in Denmark and companies and individuals that are not tax resident in Denmark. Taxpayers resident in Denmark are subject to full tax liability.<\/p>\n<p>Foreign taxpayers:<\/p>\n<p>Companies and individuals that are not tax resident in Denmark may be subject to a limited tax liability in Denmark on certain types of income. Foreign franchisors will likely experience that multiple jurisdictions impose taxes on the same income. However, the issue of double taxation is mitigated by double taxation treaties.<\/p>\n<p>Royalties:<\/p>\n<p>Foreign entities (foreign franchisors) are subject to a limited tax liability concerning royalties received from a Danish entity (Danish franchisee) with a withholding tax rate of 22% (2025). The Danish franchisee is responsible for withholding the tax and reporting the royalty payment to the Danish Tax Authorities by the 10th of the month following the payment. In many instances, the withholding tax rate may be reduced under a double taxation treaty.<\/p>\n<p>The tax liability does not extend to royalties covered by the EU directive 2003\/49, which pertains to a common taxation system for interest and royalty payments between associated companies in different Member States. The exemption is applicable only if the paying company (franchisee) and the receiving company (franchisor) are associated as defined in the Directive for a continuous period of at least one year, and the payment date falls within this period.<\/p>\n<p>Corporation tax:<\/p>\n<p>A company is fully liable for tax in Denmark if it is registered with the Danish Business Authority or if it has its place of effective management in Denmark. Companies can deduct expenses related to generating taxable income, subject to certain restrictions, and can amortize specific assets. Losses on tax-relevant assets may be deductible under specific conditions.<\/p>\n<p>Personal tax:<\/p>\n<p>Individuals are taxed on employment income and other sources of income with a progressive rate. Full tax liability applies if they are tax resident in Denmark or have been present for at least six months. Taxable income includes salary, self-employment profits, capital gains, interests, dividends, and pensions. Deductible expenses are limited, including work-related transport and interest on debt.<\/p>\n<p>A personal business tax regime applies to self-employed individuals, aligning their taxation with companies. Self-employment income used personally by the franchisee is subject to personal income tax. Tax paid on self-employment income is credited in personal tax.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is e-commerce regulated and does this have any specific implications on the relationship between franchisor and franchisee?  For example, can franchisees be prohibited or restricted in any way from using e-commerce in their franchise businesses?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>E-commerce is not regulated by a specific law. The franchisor&#8217;s ability to control the franchisee&#8217;s online sales is largely limited by the Danish Competition Act and the EU competition rules. If the franchisor wishes to control and restrict the franchisee&#8217;s online sales, the restrictions may not effectively prevent the franchisee from using online sales as a sales channel.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the applicable data protection laws and do they have any specific implications for the franchisor\/franchisee relationship?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Denmark, the primary legislation concerning data protection is the General Data Protection Regulation (GDPR), which is an EU regulation, along with the Danish Data Protection Act that supplements the GDPR.<\/p>\n<p>The franchisor and the franchisee need to establish the roles of data controller, data processor and any joint controllership activities in relation to the exchange and processing of personal data between the franchisor and the franchisee.<\/p>\n<p>Based on the identification of the data protection roles between the franchisor and the franchisee, the parties must enter into any necessary agreements, such as data processing agreements or agreements that sets out the roles and circumstances regarding the joint controllership.<\/p>\n<p>The data controller is responsible for ensuring compliance with GDPR and is required to, among other responsibilities, maintain a record of processing activities, provide an overview of all recipients, fulfill the obligation to inform data subjects, implement retention policies and procedures, and conduct thorough risk assessments and Data Protection Impact Assessments (DPIAs). This list is not exhaustive and should be considered as part of a broader framework for data protection compliance.<\/p>\n<p>Both the franchisor and the franchisee must implement appropriate technical and organizational security measures to protect personal data from unauthorized access, loss, or destruction.<\/p>\n<p>If personal data is transferred to third countries outside the EU\/EFA, e.g. personal data of customers transferred from a franchisee to a franchisor located outside the EU\/EEA, the transfer must be subject to appropriate safeguards as set out in GDPR chapter V and if necessary the data controller must conduct a Transfer Impact Assessment (TIA).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the franchisor permitted to restrict the transfer of (a) the franchisee's rights and obligations under the franchise agreement or (b) the ownership interests in the franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. It is common to include a provision in the franchise agreement whereby any transfer of the franchisee&#8217;s rights and obligations under the agreement must be approved by the franchisor. Further, change-of-control provisions are also common and may allow the franchisor to terminate the agreement upon the transfer of ownership interests in the franchisee without the franchisor\u2019s prior approval.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a franchisee have a right to request a renewal on expiration of the initial term? In what circumstances can a franchisor refuse to renew a franchise agreement? If the franchise agreement is not renewed or it if it terminates or expires, is the franchisee entitled to compensation? If so, under what circumstances and how is the compensation payment calculated?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A franchisee does not automatically have a right to demand a renewal upon expiration unless specifically stated in the agreement. The franchisee may request a renewal of the franchise agreement but the franchisor is entitled to refuse a renewal. There is no legislation compelling a franchisor to renew an expired or soon-to-expire franchise agreement.<\/p>\n<p>If the franchise agreement is not renewed or if it terminates or expires, the franchisee is not entitled to compensation under Danish law unless it is specifically stated in the franchise agreement. However, compensation may be relevant if the agreement grants the right to compensation under certain circumstances, such as investments made by the franchisee that have not been depreciated or if the franchise agreement is terminated due to the franchisor\u2019s material breach.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any mandatory termination rights which may override any contractual termination rights? Is there a minimum notice period that the parties must adhere to?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Danish law, there are generally no specific statutory termination rights that automatically override contractual termination rights. The principle of freedom of contract allows parties to agree on termination terms, including termination rights and notice periods.<\/p>\n<p>If the franchise agreement does not specify a notice period for termination for convenience, and the franchise agreement does not explicitly state that it is non-terminable, termination for convenience will require reasonable notice. The specific notice period depends on the circumstances, but based on case law, it is often six months.<\/p>\n<p>If the franchise agreement does not specify a notice for termination for material breach, the franchise agreement may be terminated with immediate effect.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any intangible assets in the franchisee\u2019s business which the franchisee can claim ownership of on expiry or termination, e.g. customer data, local goodwill, etc.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Intangible assets and intellectual property developed during the duration of the franchise agreement are typically owned by the franchisor. The franchisee generally cannot claim ownership of these assets upon expiry or termination of the franchise agreement. The franchise agreement usually includes provisions that govern this aspect.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a national franchising association? Is membership required? If not, is membership commercially advisable? What are the additional obligations of the national franchising association?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is currently no national franchising association.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are foreign franchisors treated differently to domestic franchisors? Does national law\/regulation impose any debt\/equity restrictions? Are there any restrictions on the capital structure of a company incorporated in your country with a foreign parent (thin capitalisation rules)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No legislation treats foreign franchisors differently from domestic franchisors in Denmark. As a member state of the EU, Denmark must comply with the fundamental principles of non-discrimination and free movement of goods, labour, services, persons and capital. A franchisor\u2019s foreign origin has no effect.<\/p>\n<p>However, it should be noted that there are certain restrictions in Danish law for foreign entities or individuals, e.g., foreign franchisors must obtain permission from the Danish Ministry of Justice to acquire real estate in Denmark.<\/p>\n<p>Danish company law requires that limited liability companies (A\/S) have a share capital of at least 400,000 DKK and that private limited liability companies (ApS) have a share capital of at least 20,000 DKK. This applies no matter if the company is incorporated og owned by a domestic or foreign company. The capital requirements does not apply to the establishment of Danish branches of foreign companies.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement be governed by local law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. The parties are free to choose which law will govern the franchise agreement. Consequently, they may choose a different jurisdiction if it aligns with their interests, for example, if the franchisor is based in another country and prefers the franchise agreement to be governed by the laws of its home country.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What dispute resolution procedures are available to franchisors and franchisees? Are there any advantages to out of court procedures such as arbitration, in particular if the franchise agreement is subject to a foreign governing law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are several options available for resolving disputes between franchisors and franchisees and there is no mandatory dispute resolution procedure.<\/p>\n<p>The parties can attempt to resolve the conflict through direct negotiations. They may also agree to mediation as a form of dispute resolution where a mediator assists the parties in reaching an agreement. Many franchise agreements stipulate arbitration to settle disputes due to its confidential nature. Additionally, the ordinary court system is available for dispute resolution.<\/p>\n<p>Arbitration offers several advantages, including flexibility, speed, and efficiency. It allows the parties to exert control over various elements, such as the number and appointment of judges and the place of the proceedings. When a franchise agreement is governed by foreign law, arbitration becomes particularly advantageous as it enables the selection of judges with knowledge of the relevant specific legislation. Furthermore, the process provides a degree of privacy and confidentiality.<\/p>\n<p>As Denmark is a party to the New York Convention, it will (in general) be unproblematic for foreign franchisors or franchisees to enforce an arbitration award in another state that is also party to the New York Convention.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement and disclosure documents be in the local language?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. The parties themselves decide the language of the franchise agreement.<\/p>\n<p>As previously mentioned, there are no disclosure requirements prior to the conclusion of the franchise agreement under Danish law. If disclosure documents the parties a free to decide the language.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to sign the franchise agreement using an electronic signature (rather than a wet ink signature)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. It is possible to sign the franchise agreement using an electronic signature in Denmark. Under Danish law, there are generally no formal requirements for entering into agreements and electronic signatures have the same validity as traditional wet ink signatures. Also, the EU eIDAS Regulation applies in Denmark.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do you foresee any significant commercial or legal developments that might impact on franchise relationships over the next year or so?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Danish Accessibility Act, which is based on the EU Directive, became effective from 28 June 2025. The Act aims to ensure equal access to products and services for everyone, including people with disabilities. The Act requires businesses, including franchises, to meet specific accessibility standards which may require changes to design and functionality, affecting areas like online shops and payment systems.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">5200<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/114382","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=114382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}