{"id":122562,"date":"2025-12-09T15:20:16","date_gmt":"2025-12-09T15:20:16","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=122562"},"modified":"2025-12-09T15:20:16","modified_gmt":"2025-12-09T15:20:16","slug":"austria-franchise-licensing","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/austria-franchise-licensing\/","title":{"rendered":"Austria: Franchise &amp; Licensing"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-122562","comparative_guide","type-comparative_guide","status-publish","hentry","guides-franchise-licensing","jurisdictions-austria"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Baker McKenzie Rechtsanw\u00e4lte LLP &amp; Co KG<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2025\/12\/Baker_McKenzie_300dpi.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Baker McKenzie Rechtsanw\u00e4lte LLP &amp; Co KG<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2025\/12\/Baker_McKenzie_300dpi.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 Austria<\/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>Austrian law does not provide for a definition of a franchise. However, the EU Guidelines on Vertical Restraints, which accompany the EU Vertical Block Exemption Regulation (directly applicable in Austria), describe franchising as follows: &#8220;Franchise agreements contain licences of IPRs relating, in particular, to trademarks or signs and know-how for the use and distribution of goods or services. In addition to the licence of IPRs, the franchisor usually provides the franchisee with commercial or technical assistance during the lifetime of the agreement. The licence and the assistance are integral components of the business method being franchised. The franchisor is in general paid a franchise fee by the franchisee for the use of the particular business method. Franchising may enable the franchisor to establish, with limited investments, a uniform network for the distribution of its products. In addition to the provision of the business method, franchise agreements usually contain a combination of various vertical restraints concerning the products being distributed, for instance selective distribution and\/or non-compete obligations.&#8221;<\/p>\n<p>The Austrian Supreme Court regularly had to deal with franchising and defines it at follows: &#8220;<em>continuing- obligation relationship<\/em>&#8221; where the franchisor grants the right to use its name, brand, equipment and commercial\/technical experience, obliges the franchisee to follow the franchisor\u2019s organisational and advertising system, and provides assistance, advice and training.<\/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 specific disclosure requirements for franchise agreements. Under the Austrian Civil Code a (potential) contracting partner must be informed about all circumstances which might be relevant for its decision whether or not to conclude the contract. So, in practice franchise systems in Austria work with disclosure checklists when negotiating with potential franchisees. Not having disclosed all the relevant information, e.g. that a certain franchise location went in bankruptcy several times, might lead to damages.<\/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>The disclosure must be made to each individual SPV that will operate as a franchisee, not just to the parent company. Relying solely on disclosure to the parent company creates significant legal risk for the franchisor.<\/p>\n<p>The duty of disclosure is owed to the legal entity that is entering into the franchise agreement. In a structure where each outlet is operated by a separate SPV, each SPV is a distinct legal person and the direct signatory to its own franchise contract. The parent company, while economically linked, is not the contractual partner for that specific outlet. Therefore, the franchisor&#8217;s legal duty is owed to each SPV individually.<\/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>A franchisee who has been mis-sold a franchise can pursue damages, contract rescission, reimbursement of pre-contractual fees, and possibly additional compensation under Commercial Agency Law.<\/p>\n<p>Franchisors are usually concerned with exempting themselves from liability for breach of pre-contractual disclosure obligations through certain formulations in the contracts, by stating that the communicated revenue figures are presented only as examples and contain no guarantee that the franchisee will likewise achieve these revenues. Such clauses can protect the franchisor from liability due to breach of pre-contractual disclosure obligations, but not in cases where s\/he has intentionally or (grossly) negligently provided incorrect and incomplete information to the franchisee.<\/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\">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, franchisors may legally issue a non-negotiable, standard-form franchise agreement in Austria, however there is a risk that certain clauses which grossly disadvantage the franchisee are null and void, especially if not negotiated.<\/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>A trademark is protected only after it has been registered, either in the national trademark register, through the international Madrid system, or as a Community Trade Mark that covers the whole European Union. Registration grants the owner an exclusive right for ten years, which can be renewed indefinitely in ten -year increments. The franchisor therefore must be the owner or the exclusive licensee of the mark and must list the registration details in the franchise contract so that the franchisee may use the signs only under the conditions prescribed by the franchisor. It can also be agreed that the authorization to use the trademark will be registered in the trademark register by the franchisee. However, registration in the trademark register is not a necessary prerequisite for the franchisee to have the authorization to use the trademark. The franchise agreement can provide that certain types of usage of the trademark, e.g. in local advertising measures, require the franchisor&#8217;s prior consent.<\/p>\n<p>Know-how and trade secrets are protected principally by contractual confidentiality obligations and by the Austrian Unfair Competition Act (UWG) provisions on business secrets. The franchisor must expressly define the know-how as \u201csecret, essential and identified\u201d and bind the franchisee to keep it confidential, to refrain from disclosing it to third parties and to ensure that its own staff do not less respect the secrecy obligation. Breach of these obligations can give rise to civil liability, damages and injunctive relief.<\/p>\n<p>Copyright arises automatically in Austria the moment a work of literature, art, music, software or other protected expression is created; no formal registration is required. The creator &#8211; often the franchisor &#8211; holds exclusive rights to reproduce, distribute, publicly display and adapt the work. In franchise agreements the franchisor typically grants the franchisee an exclusive licence to use the copyrighted manuals, marketing material, software and other documents, while reserving the right to prohibit any unauthorised usage or modification.<\/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>The Austrian franchising relationship is not regulated by a dedicated franchise statute; instead it is governed by the general provisions of the Austrian Civil Code (ABGB) and the Commercial Code (UGB) together with competition, consumer-protection and, in certain cases, the commercial agency law that is partly applied by analogy to franchisees. Because there is no specific franchise law, the parties must rely on these broader legal regimes to structure their ongoing obligations.<\/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>Franchise agreements are treated as vertical distribution agreements. They must therefore comply with the EU competition provisions (Art. 101 (TFEU), and the Block Exemption Regulation (BER), which sets out the conditions under which vertical restraints are exempt from the cartel law. In Austria, the national counterpart is the Austrian Cartel Act (Kartellgesetz), which applies the same rules and gives the competition authority the power to assess compliance.<\/p>\n<p>Online-sales restrictions are permissible only when it is necessary to protect the franchisor\u2019s intellectual property or to preserve the uniformity of the system. The restriction must be proportionate and cannot be used merely to block competition. If the restriction goes beyond what is needed for brand protection, it would be regarded as a vertical market-restriction that falls outside the BER and would be prohibited.<\/p>\n<p>Exclusive supply (or exclusive purchase obligations) &#8211; the franchisor may require the franchisee to obtain the supplied goods exclusively from the franchisor or an approved source, but the BER limits the duration of such an obligation to a maximum of five years unless a compelling justification (e.g., protection of confidential know-how) can be demonstrated. The rule also stipulates that an exclusive purchase clause may not exceed 80 % of the franchisee\u2019s annual purchases for the relevant product category.<\/p>\n<p>Retail-price fixing &#8211; any clause that obliges the franchisee to sell at a fixed resale price, to maintain a minimum price, or to coordinate price changes is a classic price-fixing restriction and is not compatible with the BER. The EU competition law treats price coordination as a per se violation, and national courts have confirmed that even \u201cprice recommendations\u201d become illegal if they are factually binding.<\/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>In Austria, the franchisor may insert both in-term and post-term non-competition and non-solicitation clauses into a franchise agreement, but their enforceability is circumscribed by competition law and by the specific provisions of the Austrian commercial agency legislation that are applied by analogy.<\/p>\n<p>During the contractual relationship a non-competition clause that prevents the franchisee from operating a competing business or from assisting a competitor is generally permissible, provided that it is limited to the territory covered by the franchise and to activities that would directly conflict with the franchisor\u2019s system. The Austrian courts treat such clauses as part of the vertical restraints allowed under the BER as long as they are necessary to protect the franchisor\u2019s know-how, trademarks or the uniformity of the system.<\/p>\n<p>Once the franchise agreement ends, the franchisor may also impose a post-contractual non-competition obligation. The BER limits such a restriction to a maximum duration of one year and confines it to the place in which the franchisee operated during the contract. A longer or broader post-termination non-compete would be classified as a \u201ccore restriction\u201d and therefore void under both EU competition law and the Austrian Cartel Act. The same time limit applies to any non-solicitation clause that bars the former franchisee from poaching the franchisor\u2019s customers or employees; the permissible period is likewise six to twenty-four months in practice, with six months being the typical minimum and twenty-four months the upper bound that the competition-law commentary regards as acceptable.<\/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. This duty is not based on a specific franchise law but is a core principle of Austrian contract law, known as &#8220;<em>Treu und Glauben<\/em>&#8221; (good faith and fair dealing). It is derived from general provisions of the Austrian Civil Code (ABGB), particularly sections 863 and 914, which govern contract interpretation and performance. Because franchise agreements are considered long-term contractual relationships (<em>Dauerschuldverh\u00e4ltnisse<\/em>), this duty of good faith is heightened, creating a permanent, mutual duty of care, loyalty, and consideration (<em>F\u00fcrsorge- und Treuepflicht<\/em>) between the franchisor and the franchisee.<\/p>\n<p>The Austrian Supreme Court has affirmed that the franchisor&#8217;s duty of loyalty means it must support the franchisee&#8217;s business activities and refrain from anything that could harm their success. This includes an obligation not to enable a competing business, even one within the same franchise system, to open in the &#8220;immediate vicinity&#8221; of an existing franchisee&#8217;s location. The franchisor may also be barred from introducing competing distribution channels, such as a mail-order business, that undercut the franchisee&#8217;s prices without providing fair compensation.<\/p>\n<p>The franchisor has a duty of &#8220;Systempflege&#8221; (system care), which means it must maintain and develop the franchise system for the benefit of all franchisees. A failure to do so can be considered a breach of the loyalty duty. The franchisor is also obligated to support the franchisee&#8217;s sales and promotional activities.<\/p>\n<p>On the other hand, the franchisee has an implied duty to provide the franchisor with essential information, even if not explicitly required by the contract. The franchisee is also bound by a duty of &#8220;Konzepttreue&#8221; (loyalty to the concept), which requires adherence to the system&#8217;s operational standards and business methods. Moreover, the franchisee must actively work to promote the success of the business and the reputation of the franchise system and must refrain from any actions that could harm it.<\/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>Austrian law can re-classify an individual franchisee itself as being similar to an employee (\u201c<em>arbeitnehmer\u00e4hnlich<\/em>\u201d). The consequence would not be that such franchisee would be regarded as employee under labour law but that labour courts would be competent for any disputes between the franchisor and the franchisee.<\/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 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>Under Austrian law a franchisee can be re-characterised as a commercial agent (e.g., <em>Handelsvertreter<\/em>) when the contractual relationship displays the hallmarks of a commercial-agency arrangement.<\/p>\n<p>The key factors that trigger this risk are: 1) Acting in the principal\u2019s name and on the principal\u2019s account \u2013 a commercial agent mediates or concludes business \u201cin the name and for the account of another party\u201d. If a franchise agreement gives the franchisee this type of authority, the franchisee may be viewed as an agent rather than an independent entrepreneur. 2) Personal dependency \u2013 a strong, continuous control by the franchisor over the franchisee\u2019s working hours, location, or conduct signals an employment-like (or agency-like) dependence, which the courts use to distinguish agents from independent dealers. 3) Lack of independent risk-bearing \u2013 commercial agents do not bear the entrepreneurial loss risk of the principal\u2019s business, whereas franchisees are expected to use their own capital and bear the commercial risk. When a franchisee\u2019s financial exposure is limited to fixed fees, the relationship may be seen as more agent-like.<\/p>\n<p>According to case law of the Austrian Supreme Court the franchisee might also be treated like a commercial agent when it comes to termination payment in case the franchisee is integrated in the distribution system of the franchisor similar to a commercial agent. Relevant aspects are for example: reporting obligations, obligations to use certain trademarks, minimum purchase requirements, audit rights of the franchisor, etc. In case of such an integration commercial agency law would be applicable by analogy to the franchise agreement. The termination payment under the Austrian commercial agency law is compulsory and cannot be excluded.<\/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>In Austria, there is no specific franchise law; therefore, the nature and payment of royalties are governed by the principle of contractual freedom. This allows the franchisor and franchisee to freely negotiate the terms. Structure of Royalties: The parties can agree on various royalty structures. A common model is a recurring fee calculated as a percentage of the franchisee&#8217;s net sales revenue. In 2006, the average ongoing franchise fee in Austria was 5.37% of the net total sales revenue.<\/p>\n<p>There are no specific legal restrictions mentioned in the sources that would affect the payment of royalties to a foreign franchisor, such as foreign exchange controls. The general principle of contractual freedom applies, allowing for cross-border payments as agreed upon by the parties. There is no legal requirement for payments under a franchise agreement to be made in the local currency (Euro).<\/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 and common practice in Austrian franchise agreements to impose contractual penalties on franchisees for breaches of key obligations, including restrictive covenants. These penalties serve as a deterrent and provide the franchisor with a pre-agreed remedy without needing to prove the exact amount of damages suffered from the breach. However, it should be noted in this context that all direct and indirect non-compete provisions for an indefinite period or for a period of more than five years are not exempt under the BER and are therefore ineffective. In any case, the lawfulness of a non-compete provision must be assessed on a case-by-case basis.<\/p>\n<p>Requirements &#8211; ensure the underlying restrictive covenant is valid and compliant with competition law; set a penalty amount that is reasonable and proportionate to the franchisor&#8217;s legitimate interests; clearly define the triggering breaches and the calculation method in the contract; be aware that even with a contractual waiver, a court may still review and potentially reduce a penalty that it deems excessive.<\/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 franchise royalties in Austria are subject to VAT, are taxable as ordinary business income for the franchisor and deductible for the franchisee, and may be subject to a 20 % withholding tax when paid to a foreign franchisor unless a treaty reduces that rate. The parties are free to decide the currency of payment, but they must reflect the VAT and any withholding-tax requirements in the contractual terms.<\/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>A franchisee in Austria cannot be completely prohibited from using e-commerce, as a total ban on internet sales would illegally restrict passive selling. However, the franchisor can, and typically will, contractually forbid the franchisee from actively targeting customers in territories exclusively assigned to the franchisor or other franchisees, while also enforcing strict brand and quality standards for any online presence.<\/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>Data protection laws: The applicable data protection laws do not have any specific implications for the franchisor\/franchisee relationship. Usually, franchise agreements do contain provision about using the customer data of customers of the franchisee by the franchisor for marketing activities which needs the approval of the customers and the conclusion of a data processing agreement between the franchisor and the franchisee.<\/p>\n<p>Transfer of contractual rights\/obligations: The franchisor may forbid any assignment or pledge of the franchisee\u2019s rights and obligations without its prior written consent.<\/p>\n<p>Transfer of ownership interests: The franchisor can condition or outright block changes in the franchisee\u2019s ownership structure\u2014through consent clauses, extraordinary termination rights, or a right of first refusal\u2014 especially when a significant share-holding shift occurs (e.g., &gt;25 % of voting rights).<\/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>Under Austrian law a franchise agreement does not create a statutory \u201cright of renewal\u201d for the franchisee. The possibility of extending the relationship after the initial term is therefore a matter of contract. A franchisee may request that the contract be renewed when the fixed term expires, but the franchisor is not obliged to prolong it and vice-versa.<\/p>\n<p>In some instances franchise agreements foresee the right of the franchisee to ask for a prolongation or the conclusion of a new franchise agreement. Typically such option is contractually subject to various conditions, like (i) no breach of the franchisee\u2019s contractual duties (e.g., failure to observe the franchisor\u2019s quality standards, non-payment of royalties, or violation of the territorial-exclusivity clause); (ii) no material deterioration of the franchisee\u2019s performance that endangers the brand or the system, etc.<\/p>\n<p>If the franchisor decides not to renew or the contract otherwise ends, the franchisee may be entitled to a termination compensation. Austrian jurisprudence has accepted that a franchisee can invoke the termination payment in analogy with section 24 of the Austrian Commercial Agency Act, under the condition that the franchisee has created value for the franchisor by bringing in new customers or substantially expanding existing business. The amount is not fixed by statute; it is determined by fairness (\u201c<em>Billigkeit<\/em>\u201d) and takes into account the lost commissions or the monetary value of the customer base that the franchisee built.<\/p>\n<p>A second, more limited, source of compensation is the investment-restitution claim under section 454 of the Austrian Commercial Code. This claim may arise when the franchisor terminates the agreement for a reason that is attributable to the franchisor (e.g., an unjustified termination) and the franchisee has made substantial, non-amortised investments in the franchise system (real-estate, equipment, fit-out, marketing). The franchisor must then reimburse the reasonable value of those investments. Such claim is excluded if the franchisee itself terminated the contract or if the termination was caused by the franchisee.<\/p>\n<p>In practice, therefore, a franchisee\u2019s entitlement to compensation after a non-renewal or termination depends on two conditions: (1) the franchisee must have contributed to the franchisor\u2019s goodwill by acquiring or expanding customers, and (2) the termination must not be attributable to the franchisee\u2019s own breach or voluntary exit.<\/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>A fundamental principle governing continuous obligations in Austrian law is that either party has an inalienable right to terminate the agreement prematurely for an &#8220;important reason&#8221; ( <em>aus wichtigem Grund<\/em>). This right allows for immediate dissolution of the contract when circumstances arise that make its continuation unreasonable for one of the parties. This principle cannot be contractually excluded or waived in advance.<\/p>\n<p>The Austrian Supreme Court in its Stefanel decision, affirmed that franchise agreements can be terminated for important reasons if it is unreasonable to expect a party to remain bound by the contract until the next available termination date. The legal basis for this is drawn from general principles of the Austrian Civil Code (ABGB) concerning long-term contracts, supplemented by the analogous application of the Austrian Commercial Agency Act. Therefore, even if a franchise contract specifies a fixed term or lists exclusive grounds for termination, this overriding right to dissolve the relationship for a compelling reason remains intact. It is common practice to list potential &#8220;important reasons&#8221; in the franchise agreement, but such a list is generally considered illustrative (<em>demonstrativ<\/em>) rather than exhaustive, meaning other unlisted but equally serious grounds can still justify termination.<\/p>\n<p>There is no specific statute dictating a minimum notice period. Parties are, in principle, free to agree on their own terms. However, this freedom is constrained by the general provisions of the Civil Code, particularly section 879 of the Austrian Civil Code, which voids contractual terms that are contrary to good morals (<em>sittenwidrig<\/em>) or grossly disadvantageous. An excessively short notice period in a franchise agreement could be challenged on these grounds, especially where the franchisee has made substantial, long-term investments in reliance on the continuation of the relationship. The Supreme Court has, for instance, deemed a three-month notice period in a dealer contract to be unconscionable and therefore void, suggesting that a period of at least one year was necessary given the circumstances. This means that while no fixed minimum notice period exists for franchisees, a de facto minimum is imposed by the courts&#8217; fairness review, which considers factors like the franchisee&#8217;s investment level and the time required to transition the business to a new supplier or system.<\/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>When the franchise agreement terminates, the franchisee must immediately stop using the franchisor&#8217;s trademarks, logos, and other branding materials. The franchisee also remains bound by confidentiality obligations and must keep the franchisor&#8217;s proprietary know-how secret.<\/p>\n<p>Paying the initial franchise fee does not give the franchisee ownership of the customer list, the goodwill of the business, or any intellectual-property rights. These remain the franchisor&#8217;s property throughout and after the relationship.<\/p>\n<p>The franchisee may continue serving its existing customers after the agreement ends\u2014unless a non-competition clause prevents this\u2014but it cannot claim ownership of the goodwill it helped create.<\/p>\n<p>However, as already mentioned under question 20 here above, the franchisee might be entitled to a termination payment similar to a commercial agent when the franchise agreement comes to an end.<\/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>Yes, Austria has a national franchising association known as the \u00d6sterreichischer Franchise-Verband (\u00d6FV), or the Austrian Franchise Association. Membership in the \u00d6FV is not legally required or mandatory for a business to operate as a franchise in Austria. The primary source of additional obligations for members of the Austrian Franchise Association is its Code of Ethics (<em>Ethikkodex<\/em>).<\/p>\n<p>The key obligations include: 1) Members must operate a system that aligns with the \u00d6FV&#8217;s definition of franchising: a vertically- cooperative sales system of legally independent entrepreneurs operating under a uniform market presence, based on a long-term contract. This framework requires the franchisor to provide a comprehensive package including procurement, sales, and organizational concepts, the right to use intellectual property, training, and a commitment to actively and continuously support the franchisee while developing the system further. 2) The association&#8217;s code implies a duty of care before a contract is signed. The franchisor is expected to ensure that prospective franchisees have the necessary basic knowledge, training, personal suitability, and financial resources to operate the franchise business successfully. 3) The franchisee&#8217;s obligation to actively operate the business (<em>Betriebspflicht<\/em>) to ensure the market penetration and reputation of the system, which benefits all participants.<\/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>Austrian law does not distinguish between foreign and domestic franchisors in the substantive regulation of franchise relationships. The only national constraints that affect a foreign franchisor\u2019s Austrian subsidiary are the general corporate-law capital-requirements, the EU competition-law vertical-block exemption, and the thin-capitalisation rules that limit the deductibility of excessive related-party debt. Compliance with these provisions will ensure that a foreign franchisor can operate in Austria on an equal footing with domestic competitors.<\/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.<\/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>Franchisors and franchisees in Austria have several procedures available for resolving disputes, including litigation in state courts and alternative dispute resolution (ADR) methods like arbitration and mediation. While state courts are the default, out-of-court procedures, particularly arbitration, offer significant advantages, especially when a foreign governing law is involved or the seat of the franchisor is outside of the European Union to permit enforceability.<\/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.<\/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 \u2013 an Austrian franchise agreement can be concluded with an electronic signature.<\/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>ESG topics will become more and more relevant for franchise systems, especially when it comes to the supply chain.<\/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\">4886<\/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\/122562","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=122562"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}