Franchising 2025 Comparisons

The Danish franchise market is a dynamic sector that has experienced significant growth in recent years. It forms a particularly important part of the retail and service industries in Denmark.

Market Size

Franchising in Denmark covers a wide range of industries, including restaurants, retail and services. Though the exact number of franchise businesses varies, franchising is a widespread business model in Denmark, and it significantly contributes to the Danish economy by creating jobs and stimulating entrepreneurship.

The Danish franchise market is characterised by a mix of strong international brands and innovative national concepts, together creating a varied and competitive market.

International Brands

Several international franchise brands have established a strong presence in Denmark. Some of the most well-known include:

• McDonald’s – one of the largest fast-food chains in the world, with a significant presence in Denmark;
• Burger King – a competitor of McDonald’s, also with many restaurants in Denmark;
• 7-Eleven – a widespread and popular convenience store chain in larger cities and at a large number of Danish railway stations;
• Starbucks – the world’s largest coffee chain, with many coffee shops in Denmark; and
• Carl’s Jr – an American fast-food chain with multiple restaurants in Denmark. 

Domestic Brands

Several Danish franchise businesses have also been successful both nationally and internationally – eg:

• Joe & the Juice – a Danish chain offering juice, coffee and sandwiches, which has expanded internationally (most recently in the Middle East);
• Søstrene Grene – a Danish retailer of a wide range of products in home decorations, creativity and accessories, which has mainly expanded in Europe;
• Flying Tiger Copenhagen – a Danish retailer of everyday items and seasonal goods, which has expanded internationally;
• Sunset Boulevard – a Danish fast-food chain focusing on quality burgers and sandwiches, mainly present in the Danish market; and
• Kvik – a Danish retailer of kitchens, wardrobes and bathroom fittings, which has expanded internationally.

In Denmark, franchising is not governed by specific franchise laws but rather by the Danish Contracts Act and general Danish contract law principles – most notably, the principle of freedom of contract.

Franchising must also adhere to a variety of special legislation. This includes but is not limited to:

• the Marketing Practices Act;
• the Competition Act;
• the Business Lease Act;
• the Product Liability Act; and
• the Interest Act.

Under Danish law, there is no statutory definition of “franchising”.

However, “franchising” is generally understood as a business model where a franchisor, through a franchise agreement, grants a franchisee the right to operate a business using the franchisor’s brand, trade mark and business system. The franchisor is the original business owner who has developed a successful brand and business system. The franchisee is another business that wants to open and operate one or more stores using the franchisor’s brand and business system.

In Denmark, there is no legal mandatory requirement for franchisors to disclose information before entering into a franchise agreement with a franchisee.

However, it is generally recommended that franchisors provide certain disclosures due to the principles of culpa in contrahendo and the obligation of good faith. These principles suggest that it is prudent to share relevant information before finalising a franchise agreement.

The obligation of good faith requires both the franchisor and the franchisee to consider each other’s interests and provide necessary information to prevent losses. Thus, concealing information or misleading behaviour can be a breach of the principle of good faith.

While not legally required, franchisors are encouraged to share key details that could affect the franchisee’s decision-making process. These might include:

• information about the expected profitability of the franchise;
• any significant legal disputes that could impact the franchisee’s operations; or
• the status of trade mark applications.

Such transparency helps build trust and ensures that the franchisee is fully informed about potential risks and opportunities prior to entering into the franchise agreement.

While there are no specific legal disclosure requirements either before or after signing a franchise agreement, a franchisor’s failure to disclose essential information may lead to certain legal consequences. If the franchisor misrepresents or mis-sells essential information regarding the franchise concept, the franchisee may have the right to nullify the franchise agreement depending on the nature of the misrepresentation of information.

If the franchisee is misled, they may pursue legal action to seek reimbursement or damages. This might include reimbursement for losses incurred due to the franchisor’s lack of disclosure.

Duty of Loyalty

If a franchisor fraudulently neglects the duty of loyalty and fails to disclose material commercial information, the franchise agreement could be considered invalid. Additionally, failing to uphold this duty may be seen as a breach of contract, providing the franchisee with grounds to seek remedies.

Remedies for Breach of Contract

In cases where the franchisor breaches the franchise agreement, the franchisee has the right to claim damages. To do so, several conditions must be met:

• the franchisor must be liable (culpa);
• the franchisee must have suffered a loss;
• the loss must have been foreseeable; and
• there must be an adequate causal connection between the breach and the incurred loss.

Furthermore, pre-contractual liability requires evidence of unfair conduct or violation of pre-contractual principles. Damages can be sought for losses and expenses related to the conclusion of the agreement, effectively restoring the non-breaching party to the position they would have been in had the agreement not been made (reliance damages).

As mentioned in 2.2 Consequences of a Failure to Disclose, there is no disclosure obligation under Danish law.

Danish law does not require pre-contractual disclosure and therefore does not require disclosure documents. If the franchisor decides to provide disclosure documents, they are free to determine the language of the disclosure documents, and there is no legal requirement for the documents to be translated into Danish. Danish and English are widely used as contracting languages for franchise agreements in Denmark.

There is no franchise registration law in Denmark, and there are no required or mandatory franchise registrations before a franchisor can operate. There are also no requirements that franchise agreements be registered with Danish authorities.

Under Danish law, professional parties entering into agreements are generally not bound by any stringent formal requirements. This means that the formation of contracts does not necessitate adherence to specific formalities or procedures, allowing for a more flexible approach to the creation of legally binding agreements. Hence, a franchise agreement does not require registration with Danish authorities to be considered valid and enforceable.

There are no registration requirements for franchise agreements under Danish law.

There are no registration requirements for franchise agreements under Danish law.

There are no legal requirements stipulating that the franchisor demonstrate that the business concept has operated profitably for a period of time before entering into a franchise agreement.

Under Danish law, there are generally no requirements that must be met before a company can enter into a franchise agreement.

Under Danish law, there are no legal or regulatory requirements regarding the minimum or maximum duration of a franchise agreement.

Franchise agreements are governed by the contractual principle of freedom of contract. This means that the parties have the autonomy to determine the content of the agreement with generally few restrictions on its terms. Consequently, the parties are free to agree on the duration of the franchise agreement.

However, if the franchise agreement contains a non-compete obligation, the parties should be aware of the restrictions on the duration of such non-compete obligation according to competition law (see 6.2 Exclusive Territories and Competing Businesses for further information). This implies that a duration of five years is typical for franchise agreements in Denmark.

Although there are no statutory requirements regarding the duration of a franchise agreement, practical considerations such as the size of the investment, repayment periods and market conditions may influence the determination of the agreement’s duration. It is also common for franchise agreements to include provisions for extension or termination, which can affect the actual duration of the agreement.

The franchisee does not have a legal or statutory right to renew the franchise agreement upon expiry. A renewal right must be explicitly outlined within the franchise agreement itself. While the franchisee can request the renewal of the agreement, the franchisor retains the discretion to decline such a request. Danish law does not impose any obligation on franchisors to extend or renew a franchise agreement that is about to expire or has expired.

Compensation Upon Non-Renewal

Danish law does not entitle the franchisee to receive compensation if the franchise agreement is not renewed, expires or is rightfully terminated. Compensation to the franchisee is only applicable if it is explicitly mentioned within the franchise agreement.

However, there are scenarios where compensation might be considered relevant. For instance, compensation may be warranted if the franchise agreement includes provisions for compensation under certain conditions (such as when the franchisee has made significant investments that have not yet fully depreciated) or if the franchisor is in breach of the terms of the agreement.

In summary, the renewal of franchise agreements and the entitlement to compensation upon non-renewal are governed by the terms set forth in the franchise agreement and not by statutory laws.

Goodwill Compensation Under Commercial Agency Laws

According to the Danish Commercial Agents Act, a commercial agent is entitled to goodwill compensation upon termination of the agency agreement, provided that the following conditions are met:

• the agreement is terminated by the principal;
• the agent has established a customer base from which the principal can benefit even after the collaboration with the agent has ended; and
• payment of compensation can be considered reasonable.

However, there may be specific circumstances that result in the commercial agent not being entitled to goodwill compensation.

The Risk of the Franchisee Being Deemed a Commercial Agent of the Franchisor

Under the Commercial Agents Act, a commercial agent is defined as an independent business operator that has formed a contractual relationship with another company – known as the principal – to promote the sale of the principal’s goods by negotiating the sale of the goods or by entering into sales agreements in the name of the principal. The commercial agent actively seeks out potential buyers and obtains quotations on behalf of the principal.

In contrast, a franchisee typically functions as an independent distributor, purchasing products and selling them under their own name and on their own account. Therefore, the risk that a typical franchisee would be deemed a commercial agent of the franchisor is low. Despite this distinction, there are scenarios where a franchisee might be perceived as acting as a commercial agent for the franchisor.

Therefore, it is advisable for the franchise agreement to contain clear provisions that explicitly state that the franchisee does not act as a commercial agent for the franchisor.

There are no restrictions on the termination rights of the franchisor, and Danish law does not grant statutory termination rights to the franchisee.

The principle of freedom of contract entitles the franchisor and the franchisee to mutually agree on the terms and conditions regarding termination of the franchise agreement, including the rights to terminate and the notice periods required. Danish law does not impose specific statutory termination rights that automatically supersede the agreed contractual terms. This means that the parties have the flexibility to negotiate and define their own termination provisions.

If the franchise agreement lacks a specified notice period for termination for convenience, and if the franchise agreement does not explicitly state that it is non-terminable, termination for convenience requires a reasonable notice period. The determination of what constitutes a reasonable notice period depends on the particular circumstances regarding the agreement. Nevertheless, Danish case law suggests that a notice period of approximately six months is considered reasonable in many situations. Further, the franchise agreement may be terminated upon material breach with immediate effect under Danish law, unless the franchise agreement grants the party in breach a cure period for such breach.

Franchise agreements often include restrictions – such as exclusive territories, non-compete clauses and purchase obligations – to ensure uniform distribution and to protect the franchisor’s intellectual property (IP). The European Commission and the Danish Competition Authority recognise that certain restrictions which are objectively necessary for the franchise system’s operation may be exempt from the prohibition against anti-competitive agreements in Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) – eg, restrictions on competitors’ access to know-how and non-compete obligations that are necessary to ensure a common identity and reputation of the franchise network.

Competitive restraints contained in franchise agreements will be assessed using the principles applicable to the distribution system that most closely corresponds to the particular franchise agreement – eg, a franchise agreement that results in a closed network, where the franchisees are prohibited from selling to non-franchisees, must be assessed under the principles applicable to selective distribution.

Note that under certain circumstances it may be possible to modify a franchise agreement so that it differs from what is stated in 6.2 Exclusive Territories and Competing Businesses, 6.3 Requiring Franchisees to Purchase Specific Goods and Services and 6.4 Channel Reservation. However, this would require an individual assessment of the specific agreement and relevant market conditions to ensure that the agreement is reasonable and complies with applicable law.

Exclusive Territories

The franchisor is often permitted to grant the franchisee the exclusive rights to operate the franchise within a specific geographical area, and exclusivity provisions are common in Danish franchise agreements. The agreement is covered by the Vertical Agreement Block Exemption (VBER; see also 6.5 Vertical Agreement Block Exemptions) if:

• each of the parties’ market share does not exceed 30% of their respective markets;
• the number of distributors appointed per exclusive territory or customer group does not exceed five; and
• the agreement does not contain any hardcore restrictions (eg, a restriction on passive sales).

If the franchise agreement does not contain any exclusivity provision, the franchisor is allowed to conduct business under the franchised brand in the specific geographical area itself, or may grant others the right to do so. However, the franchisor must always observe its duty of loyalty towards the franchisee.

Competing Businesses

In general, case law states that non-compete obligations that are necessary to ensure a common identity and reputation of the franchise network can prohibit the franchisee from establishing a similar business in an area where the franchisee may compete with a member of the franchising network. Such a non-compete obligation may last during the term of the contract and for a reasonable period after its expiry.

A non-compete obligation that is limited to a maximum period of one year after the termination of the franchise agreement is covered by the VBER (see again 6.5 Vertical Agreement Block Exemptions) if two additional conditions are met. First, the non-compete obligation must be limited to the point of sale from which the franchisee operated during the term of the agreement. Second, the non-compete obligation must be indispensable to protecting the know-how that the franchisor has transferred to the franchisee.

The franchisor can require the franchisee to purchase certain products and services only from the franchisor or its nominated suppliers. This is a common practice for Danish franchise arrangements.

A purchasing obligation may constitute a non-compete obligation, as it requires the franchisee to buy goods exclusively from the franchisor or nominated suppliers, thereby preventing other suppliers from competing for the contract goods. A purchasing obligation must therefore be objectively necessary for the operation of a franchise system to comply with EU competition law.

Requiring the purchase of certain products and services only from the franchisor or nominated suppliers is typically necessary to maintain the franchisor’s quality standards for the products and services offered under the franchise concept, as well as to uphold the brand’s integrity and high level of service for consumers.

A franchisor is allowed to impose certain restrictions on the franchisee’s online sales. This can include limitations on the use of specific e-commerce platforms, and can set out specific quality requirements regarding the content and layout of an e-commerce platform. However, these restrictions must not prevent the franchisee from effectively utilising the internet as a sales channel. Additionally, a franchisor may reserve certain territories or customer groups for the franchisor or other franchisees, provided that the franchisee is not prohibited from passively selling to these areas or customer groups.

When operating a business in Denmark (an EU member state) as a franchisor or franchisee, it is important to consider whether the franchise agreement is covered by the VBER, which plays a crucial role in shaping how vertical agreements are handled. The VBER provides a framework that makes permissible certain agreements which might otherwise be considered illegal under competition law for being anti-competitive.

If the franchise agreement is covered by the VBER, the parties do not need to conduct an individual assessment of whether the franchise agreement complies with the rules on competition.

For the VBER to apply, the following general conditions must be met:

• each of the parties’ market share must not exceed 30% of either the sales or purchasing market for the goods or services in question;
• the franchise agreement must constitute a vertical agreement;
• the franchise agreement must not contain so-called “hardcore restrictions” – eg, fixed prices or minimum prices (ie, resale price maintenance) and market-sharing restrictions such as restricting passive sales (ie, internet sales); and
• any provisions relating to IP rights must be ancillary to the main purpose of the franchise agreement and must be directly related to the use, sale or resale of goods or services by the franchisee or its customers.

The VBER also contains rules on various aspects relevant for franchising, including online sales, exclusivity, distribution systems and pricing.

If the foregoing conditions are not met, the franchise agreement requires an individual assessment.

The franchisor is permitted to stipulate the laws of its jurisdiction as the governing law of the franchise agreement. This is a consequence of the principle of freedom of contract under Danish law.

The choice of governing law may be influenced by various factors, such as the franchisor’s familiarity with the franchisee’s legal system, perceived advantages in terms of legal protections, or strategic business considerations. Ultimately, the decision on which jurisdiction’s laws will apply is a matter of negotiation between the parties.

There is no requirement for franchise agreements to be governed by Danish law. All elements of a franchise agreement, including the IP elements, may be governed by the laws of the domestic or foreign jurisdiction agreed between the parties.

The parties in a franchise agreement generally have the freedom to choose which law will govern their agreement. This flexibility allows them to choose a jurisdiction that best suits their interests.

Danish law does not impose mandatory content and provisions that must be contained in a franchise agreement. The fundamental legal principle of freedom of contract means that the parties are free to enter into any franchise agreement they wish, with whatever content they wish.

In the event that a franchise agreement does not address certain issues – such as termination due to material breach, force majeure, liability or notice periods – the general principles of Danish contract law and the principles of the law of obligations will apply.

Danish law does not contain a specific “blacklist” of prohibited provisions that may not be contained in a franchise agreement.

The principle of freedom of contract governs agreements, including franchise agreements. This principle allows parties to freely negotiate and establish the terms and conditions of their contractual relationships without significant interference from statutory regulations. This contractual freedom means that generally minimal restrictions are imposed on the provisions of franchise agreements, allowing for a wide range of terms to be included.

Exceptions

There are, however, some notable exceptions worth mentioning.

• Under the Danish Act on Restrictive Employment Clauses, non-solicitation clauses are deemed illegal and invalid. Consequently, the franchisor is prohibited from including such clauses in the franchise agreement.
• Competition law rules impose certain requirements that agreements and provisions must not restrict competition. If the franchise agreement contains provisions that are anti-competitive (eg, provisions on fixed prices or minimum prices), these provisions may be declared invalid (see 6. Restrictions on Competition in Franchise Agreements).
• If provisions are unreasonable, unfair or contrary to principles of fair conduct, the provisions may be amended or set aside pursuant to Section 36 of the Danish Contracts Act.

Foreign Judgments

The 1968 Brussels Convention, the 2007 Lugano Convention and EU Regulation 1215/2012 apply in Denmark. Hence, foreign judgments from EU member states and EFTA countries (Iceland, Liechtenstein, Norway and Switzerland) can be recognised and enforced in Denmark. Yet, it is important to note that certain conditions must be met and that specific exceptions apply.

Judgments issued by courts outside the EU and EFTA are generally not recognised and cannot be enforced in Denmark.

Foreign Arbitration Awards

Denmark is a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). This means that arbitration awards from other countries which have also acceded to the Convention can generally be recognised and enforced in Denmark.

Pursuant to the Danish Arbitration Act, all foreign arbitration awards can generally be recognised and enforced in Denmark. This includes arbitration awards from countries that are not party to the New York Convention.

To enforce a foreign arbitration award, the party seeking enforcement must submit a request to the Danish courts. The enforcement of foreign arbitration awards is carried out by the Danish bailiff court.

However, there are specific circumstances under which foreign arbitration awards may not be enforced in Denmark. This can occur if the defendant did not receive proper notice of the arbitration proceedings or was otherwise unable to present their case. These exceptions apply to all arbitration awards, including those from countries that are party to the New York Convention.

No restrictions are imposed on the payment of franchise fees, royalties or service fees under Danish law. The parties are free to agree on the specific amount of franchise fees, royalties or service fees.

However, payment of franchise fees, royalties or service fees must comply with Section 36 of the Contracts Act regarding unfair provisions. Section 36 of the Contracts Act is primarily aimed at protecting consumers from unfair terms imposed by economically stronger and more knowledgeable business entities. While its primary focus is consumer protection, its applicability extends to business-to-business transactions, offering a layer of fairness in commercial dealings. Despite its broad scope, Danish courts are reluctant to apply Section 36 to commercial contracts.

There is no general or annual maximum payment permitted in foreign currency or any maximum for royalties.

The Danish tax system distinguishes between companies and individuals based on their tax residency status.

Those who are considered tax residents in Denmark – whether they are companies or individuals – are subject to full tax liability. This means that they are obligated to pay taxes on their worldwide income, adhering to the comprehensive tax regulations set forth by Danish law.

Further, 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. This implies that their tax obligations are confined to certain types of income sourced from within Denmark, and they should not be required to pay taxes on income earned outside the country.

Royalties

Royalties are subject to a 22% (for 2025) withholding tax. This means that foreign companies (foreign franchisors) are subject to a limited tax liability concerning royalties received from sources (a franchisee) in Denmark. The Danish franchisee must withhold the tax and report the royalty payment to the Danish tax authorities by no later than the 10th of the month following the payment. 

In most cases, the withholding tax rate can be reduced in accordance with a double taxation treaty.

The tax liability does not include royalties that are covered by EU Directive 2003/49 on a common system of taxation applicable to interest and royalty payments made between associated companies of different member states. However, the exemption only applies if the paying company (the franchisee) and the receiving company (the franchisor) are associated as mentioned in the Directive for a continuous period of at least one year, and if the payment date also falls within this continuous period.

Fees from Denmark that fall outside the definition of “royalties” will generally not be subject to Danish limited taxation, which entails that no withholding tax must be withheld in Denmark. Therefore, “service fees” and “technical fees” paid from Denmark should generally not trigger withholding tax in Denmark.

Double Taxation Treaties

Foreign franchisors may find themselves subject to taxation by multiple jurisdictions on the same income. However, Denmark has entered into double taxation treaties that aim to mitigate this issue of double taxation.

In Denmark, there are generally no foreign currency controls that hinder or prohibit the payment of franchise fees. There are no restrictions on transferring money from Denmark, including the payment of franchise fees.

Furthermore, there is no requirement to obtain authorisation from the Bank of Denmark or the franchisee’s commercial bank before making a payment. However, it is important to be aware of standard banking procedures and any documentation requirements, which may vary from bank to bank.

There are no formalities to be observed under Danish law when signing a franchise agreement. Franchise agreements are valid without any formalities being needed (ie, authentication or notarisation of signatures, witnessing, registration or similar).

Electronic signatures, such as those provided by service providers (eg, Docusign), are permitted in Denmark. Danish law does not impose specific formal requirements for the execution of agreements, meaning that electronic signatures hold the same legal validity as handwritten signatures.

The eIDAS Regulation

Regulation (EU) 910/2014 on electronic identification and trust services for electronic transactions in the internal market (the “eIDAS Regulation”) stipulates that an electronic signature cannot be denied legal effect solely because it is electronic.

Additionally, the eIDAS Regulation sets forth several technical requirements for digital signatures. Qualified electronic signatures and advanced electronic signatures always hold the same status as handwritten signatures. The European Commission has established the eIDAS Trusted List, which includes a number of providers of electronic signatures that meet the Regulation’s requirements.

In Denmark, no specific document taxes or stamp duties apply generally to all documents. However, there may be fees associated with certain types of documents or transactions, such as registration fees when registering property or mortgages. No such taxes or stamp duties apply to franchise agreements themselves.