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Vol 12 (2014) - Issue 5

Internet issues in international franchising

Corinne Attard, Holman Webb, Sydney, Australia, Michael Lindsey, Steinbrecher & Span LLP, Los Angeles, USA, Karsten Metzlaff, Noerr LLP Berlin, Germany and John Pratt, Hamilton Pratt, Warwick, UK

The internet has developed into a significant force in the marketing and distribution of goods services. Franchisors wishing to harness this “disruptive innovation” for the benefit of the entire franchise system often want to impose controls on use of the internet by franchisees. This article covers a number of such controls available to franchisors and considers to what extent they are subject to legal and administrative restrictions with a particular focus on Australia, Europe and the US. The authors discuss direct and indirect prohibitions on online sales, quality restrictions, specifications to support the brick and mortar shop, obligation to use the franchisor’s central website and online sales by franchisors. Their detailed analysis of a fast moving area of law clearly demonstrates that franchisors should take advice before imposing controls on franchisees’ internet sales and should remain attentive to developments.

Germany – Pre-contractual disclosure requirements and relevant case law

Dagmar Waldzus, Buse Heberer Fromm, Hamburg, Germany

As there is no statutory regulation of pre-contractual disclosure requirements in Germany, the obligations of franchisors are based on principles set out by the courts. This article considers the standards and guidelines applied by German courts in cases where one party, usually the franchisee, challenges the validity of the franchise agreement for reason of violation of the franchisor’s pre-contractual obligation to inform the franchisee. The author considers the principle of “good faith”, the scope and limits of the franchisor’s obligation and recent trends in case law. Whereas there is no (general) obligation on a franchisor to advise a prospective franchisee with respect to general risks of self-employment or to provide a detailed calculation of profitability to him, recent developments show that a high level of duty of care is expected.