Franchise in Greece

The franchise is independent to runs his own business receiving a licensing agreement. The franchise package is first and foremost an organized sales concept for goods and services. It includes sales and distribution methods, commercial goods or brands, commercial names, trademarks, business designations in words and images, business forms, subsidiary systems, copyrights, technical knowledge and experience (called know-how), and patent rights.

Franchising concept

Franchisees are highly supported in the franchising system by means of staff training, equipping business operations and advice on organizational, technical, entrepreneurial and economic matters.

Economically, franchising is an organized of advertising and distribution, concerning product and services with the intension of profit through the cooperation with two or more independent businesses. Once having a trading name or commercial brand, the franchise takes advantage of the franchiser experience in order to enter an already established customer network.

The franchisee runs its own business independently meaning that it takes its risks and has its own name, acting for its own account. In that case it is differenciated from a commercial representative.

The franchise agreement

The franchisee should follow the contract concerning the methods of distribution and the establishment and running of business operation, in order to take part in the franchiser’s advertising campaign.

Franchising forms

There are two main categories of franchising such as a distribution or service franchise. In the former the franchise makes use of the franchiser’s distribution system for the products mentioned in the contract, within its own business building.

  The franchisee is obliged to sell only products of the franchiser, who can demand their manufacturing by third parties according to their specific features.

  Concerning the service franchise, the franchisee should make use of the franchiser’s distribution system so that he can provide services, following the contract and the methods of the sales which the franchiser has specified.

Form of contract

Its not necessary for the franchise agreement to be written, it can also be valid if it is verbally.

Obligations of the franchiser and franchisee

  1. a) The franchise agreement is characterised by a special relationship of trust, which creates obligations of reciprocal loyalty as early as the pre-contractual stage. There is already a duty of information on the part of the franchiser with regard to the franchise (depreciation concept) even before conclusion of contract.
  2. b) The franchiser’s obligations are basically as follows:
  • Surrender of the beneficial rights specifically offered by it
  • Transferability and awarding of licenses
  • Franchisee’s incorporation into the distribution system and service organisation
  • Training and events
  • Principle of equality of the franchisees
  • Supply of franchisee with the products or services or other intangibles for integration into the distribution network
  • Long-term organisational, technical and financial support and advice on operation of the franchise business
  • Equipping and technical installation of the franchise operation
  • Maintenance and repair of all operating systems and technical installations
  • Location and territory protection, exclusivity agreement as applicable
  • Specifications for equipping and operating the franchise business
  • Franchise manual
  • Advertising
  1. c) Franchisee’s obligations:
  • Payment of what is known as an “entry fee” for relinquishment of the rights and beneficial rights
  • Payment of fees (franchise fees), and a proportion of the profits on a case-by-case basis
  • Promotion of sales of the franchiser’s products and services through provision of the best possible personal commitment (duty to promote sales according to instructions)
  • Implementation of the sales concept and use of the distribution system
  • Obligations of loyalty and carrying out of the obligations to buy
  • Preservation of the franchiser’s industrial property right interests
  • Adherence to the franchiser’s rights of instruction and supervision, in particular allowing supervision by the franchiser
  • Duty of confidentiality and secrecy
  • Prohibition of competition
  • Duty of notification with regard to operation and the sales system.

The franchisee is furthermore obliged to observe other franchisees’ protected territory and not to offer and distribute the products allocated to it in these locations (Art. 4 of regulation 2790/1999). Furthermore it may not solicit any customers outside its own location (Art. 4 of regulation 2790) and must exclusively procure contractually specified products decided by the franchiser. Products manufactured by third parties can, however, be distributed with the franchiser’s consent.

According to Greek case law, a the franchiser reserves the right to keep the franchisee’s accounts in order to review the financial data conveyed to it by the franchisee, is not binding, because such a clause resorts to a third contractual party and thus disproportionately obligates the franchisee in an illegal way. The franchisee’s obligation to keep a list of customers has also been regarded as a restriction of free trade. In the event, however, of the franchiser being due a contractually agreed share of the profits, the franchisee can be obliged to send the franchiser copies of all the accounts information pertaining to the monthly income.

The franchiser furthermore has the option of obliging the franchisee to take legal action against a third party in the event of a violation by a third party of the rights arising from the franchise agreement relinquished to the franchisee, or even to intervene in legal action against third parties pursued by the franchiser (Art. 3, §2c of Regulation 4087/1988 in conjunction with §44e of the Commission’s guidelines).

In the event of breach of the obligations through non-performance or defective performance, the general right of defective performance shall apply. In Greek law the provision of Art. 382 et seq. of the Greek Civil Code apply.
In the individual case a contractual clause can consequently also be qualified as a breach of the competition provisions, with the consequence that the clause can be regarded as prohibited and thus void pursuant to Art. 1 of law 703/1977.

Such a case is present in particular if the franchise agreement contains provisions that do not further the object of the agreement and thus restrict competition.

Term

The most appropriate period of the contract is that of 5 years. Reneal of the contract can be achieved, on condition that there will be a mutual agreement to the contract, after a tacil conclusion.

Termination

The contract is no longer valid after the expire of the term or termination. Either with or without notice, agreement can come to an end even if it is of an unlimited term.

Profile

Iliana – Kalliopi Kokotini was born in 1989 in Athens, Greece. She is graduate of the Law School of Democritus University of Thrace, (University of Komotini), Greece. She also hands a Master’s degree (L.M.M.) from the Democritus University of Thrace, Komotini with specialization in Criminal Procedure.

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