Franchising in Sweden

Franchise Disclosure Requirements

In 2006 the Swedish parliament passed a law regulating the information a franchisor and a master franchisee must disclose within reasonable time before a potential franchisee or a sub franchisee signs the franchise agreement.  The formal name of the law is Lag (2006:484) om franchisegivarens informationsskyldighet.  Translation; Law (2006:484) on the Duty of a Franchisor to provide Information.

The aim with this law is to enhance the position of a potential franchisee in the discussions and negotiations that precede the signing of a franchise agreement.

The law defines a franchise agreement as an agreement by which an enterprise agrees with a party that the party against consideration shall use the specific business model of the enterprise regarding marketing and selling of products and services and use the trade marks and the proprietor rights of the enterprise and accepts regular controls that the franchise agreement is complied to.

The franchisor shall in general inform about the implication of the franchise agreement and about any other conditions that are needed concerning the circumstances in question.

The information shall be in writing, clear and understandable and be handed over in a separate document to the potential franchisee not later than fourteen days before the signing of the franchise agreement.  This document shall at least contain the following information.

1. A description of the franchise business that is to be operated by the franchisee.

2. Information about the other franchisees in the franchise chain and the size of their businesses.

3. Information about the payments the franchisee shall make to the franchisor and about the other financial conditions in the franchise agreement.

4. Information about the proprietor rights that are to be licensed to the franchisee.

5. Information about the products and services that the franchisee is obligated to buy or lease.

6. Information about any non-competition clause that is to be valid during the term of the franchise agreement and/or after the expiration of the agreement.

7. Information about the term of the franchise agreement, the conditions for change, prolongation and termination of the agreement and about the financial consequences connected with the termination of the franchise agreement.

8. Information about the dispute resolution rules in the franchise agreement and how the costs for such dispute resolution shall be finally distributed between the parties.

Said information shall also be handed over when the franchise agreement is to be transferred with the consent of the franchisor from the present franchisee to a new franchisee.

The Swedish Market Court can decide after a complaint has been submitted to the court by a franchisee, an association of franchisees or another association which has a legitimate interest to represent entrepreneurs that a franchisor, who has failed to present information according to the law prior to the signing of the franchise agreement, must hand over the piece of information not presented to the inflicted franchisee, and in connection with all its future franchise agreements. Such court decision can be supported by a fine that is collected by the Swedish government.

This is the only sanction connected with this law.  A breach of the law does not render the individual franchise agreement null and void or give the individual franchisee a right to compensation.

However, if a franchise agreement contains a certain onerous clause and the franchisor has not informed about this clause in accordance with the disclosure law, the franchisee in question could argue before a district court or an arbitral panel by referring to article 36 of the Swedish Contract Act (1915:218) that the clause is unreasonable and shall therefore be deemed null and void due to the fact that the franchisee has not been informed about this onerous clause before signing the franchise agreement in question.

Statutory Rules and Legislation on Franchise Agreements

There are no other laws in Sweden that only covers franchise agreements.  Such agreements are governed by the general commercial laws.

Applicable Antitrust Law

Swedish competition law is based on EU competition law and the EC regulations connected thereto.

Characteristics of Master Franchising and Area Development