Franchise lawi Legislation
Other than the Swedish Franchise Disclosure Act (the Disclosure Act), which prescribes certain pre-contractual disclosures, there is no legislation in Sweden specifically regulating the franchise relationship.
As for other Swedish legislation, the general principle of the Swedish Contracts Act is freedom of contract, which entails that parties are free to enter into contracts in the way that they see fit. Accordingly, there are no formal requirements to be fulfilled for a franchising agreement to be valid.
In drafting a franchise agreement, the above-mentioned SFF Code of Ethics should, however, be observed, as it may be applied by a court not only in respect of SFF members, but in determining generally accepted business practices for franchise agreements.ii Pre-contractual disclosureThe Disclosure Act
According to the Disclosure Act, the franchisor is under a mandatory obligation to provide the prospective franchisee with certain information. This obligation applies in respect of all agreements where the franchisee will operate in Sweden and, naturally, also where an existing franchise agreement is to be transferred to a new franchisee.
The franchisor shall provide clear, written information on the implications of the agreement and other matters that are relevant in the circumstances, which shall, at least, include:
- a description of the franchise that the franchisee is to run;
- information about other franchisees that the franchisor has entered into agreements with regarding the same franchise and the magnitude of their business;
- the remuneration that the franchisee shall pay to the franchisor and other economic conditions for the franchise;
- the intellectual property rights that are to be licensed to the franchisee;
- the goods or services that the franchisee is obligated to buy or rent;
- the prohibition of competition that applies during or after the franchise agreement has expired;
- details regarding the term of the agreement, the terms applied in respect of changes, extension and termination of the franchise agreement and the economic consequences of a termination; and
- details concerning the procedure for any future proceeding in connection to the agreement and the cost responsibilities in terms of such proceedings.
The information shall be provided well in advance, prior to the parties entering into an agreement. It is recommended that it is provided in writing and at least 14 days prior to the conclusion of the agreement.Other pre-contractual obligations
Apart from the Disclosure Act, there is no legislation in Sweden that regulates pre-contractual disclosure requirements. However, the doctrine of culpa in contrahendo is a recognised principle of Swedish law, even though it is rarely applied by the Swedish courts.iii Registration
There are no registration requirements in Sweden for franchises, nor any registration requirements in general law that impact franchising.iv Mandatory clauses
Swedish law does not prescribe any mandatory clauses in respect of franchise agreements.v Guarantees and protection
There is no specific legislation in Sweden that relates to guarantees in franchisor agreements. Since the general principle in the Swedish Contract Act is the principle of freedom of contract, guarantees given from individuals and companies are in general enforceable.