The Franchise Agreement in Swiss Law
The franchise agreement is a complex contract by which the franchisor grants the franchisee the right to use a business concept, a brand and know-how, in exchange for financial consideration (royalties, entry fees). Unlike many countries, Switzerland has no specific franchise legislation: the franchise agreement is governed entirely by the principle of freedom of contract (art. 1 CO). This makes precise contractual drafting essential. PBM Avocats assists franchisors and franchisees in Geneva and Lausanne.
Key Elements of a Franchise Agreement
| Element | Description | Key Points |
|---|---|---|
| Licence of IP rights | Use of brand, logo, know-how | Scope, territory, duration |
| Remuneration | Entry fees + royalties (% of turnover) | Fixed amounts, calculation, payment terms |
| Support obligations | Training, marketing, technical support | Frequency, quality standards |
| Territorial exclusivity | Exclusive area for the franchisee | Geographic boundaries, exceptions |
| Standards compliance | Following the franchisor's system | Audits, sanctions for non-compliance |
| Non-compete clause | During and after the contract | Max. 3 years recommended post-contract |
| Termination | Conditions, notice, consequences | Return of materials, cessation of use |
Pre-Contractual Phase: Due Diligence
Before signing a franchise agreement, the prospective franchisee should carry out thorough due diligence:
- Analysis of the financial projections provided by the franchisor
- Verification of the brand and IP rights (registration in the Trademark Register)
- Review of the franchise agreement by a specialist lawyer
- Contact with existing franchisees to assess the reality of the concept
- Analysis of the franchisor's financial stability
Disputes and Termination of Franchise Agreements
Franchise disputes often arise from:
- Alleged violation of standards by the franchisee
- Disputed royalties
- Abrupt or unjustified termination of the agreement
- Violation of the non-compete clause after termination
- Recovery of the franchise system by the franchisor
PBM Avocats has expertise in franchise dispute resolution, both in mediation and arbitration and before the ordinary courts.
Is there a specific franchise law in Switzerland?
No. Unlike France, the United States or the EU, Switzerland has no specific franchise law. The franchise contract is governed by the principle of freedom of contract in the Code of Obligations (arts. 1 et seq. CO). The CO provisions on mandate, employment and representation may apply by analogy depending on the contract clauses. This is why drafting the contract is crucial.
What essential elements must a franchise agreement contain?
A complete franchise agreement should include: the definition of the franchised concept and the right to use the trademark, royalties and entry fees, franchisee obligations (training, standards, reporting), franchisor obligations (support, territorial exclusivity), duration and renewal conditions, non-compete clauses, termination conditions and consequences.
Is the franchisor subject to a pre-contractual disclosure obligation?
In Switzerland, there is no formal statutory pre-contractual disclosure obligation as in France (DIP). However, the principles of good faith (art. 2 SCC) and culpa in contrahendo (pre-contractual liability) require the franchisor not to mislead the prospective franchisee on decisive matters. A franchisor providing unrealistic projected turnover figures could be held liable.
How can a franchise agreement be terminated in Switzerland?
For fixed-term franchise agreements, termination before the agreed end is only possible for just cause (art. 418r CO by analogy). For indefinite agreements, reasonable notice must be given. The duration of the reasonable notice depends on the length of the relationship, the investments made and the time needed to find an alternative. Abrupt termination without reasonable notice may give rise to significant damages.
Does the franchisee benefit from any protection against termination?
Swiss law does not specifically protect franchisees against termination, unlike some EU systems. However, abrupt termination that causes the franchisee significant damage may constitute a breach of good faith (art. 2 SCC) and give rise to damages. Mandatory pre-contractual disclosure clauses may also provide additional protection if the franchisor has misrepresented the business model.