Legal Foundations and Practice for Franchisors and Franchisees
Franchising refers to the technique of adopting and using another company’s successful business model in exchange for payment of a fee.
The franchise package granted to the franchisee typically includes the industrial or intellectual property rights to trademarks, trade names, shop signs, utility models, know-how, designs, copyrights or patents, together with the right to use them for the distribution of goods or services to end consumers.
The franchisor is the company that grants the franchisee, in exchange for direct or indirect financial compensation, the right to operate its franchise system. The franchisee is the company or person who receives this right in order to market products or services under the franchisor’s brand, patent, or trademark and service mark.
For the franchisor, franchising represents an alternative to building up its own branch network: it avoids the associated investment costs and liability risks but, in return, becomes dependent on the success of the franchisee – who runs its business under its own responsibility and whose day-to-day operations the franchisor cannot directly control.
Greece still has no specific franchise legislation; rather, the franchise agreement is subject to the applicable general legal provisions, in particular trademark law (Law 4679/2020, which replaced the corresponding provisions of Law 4072/2012), patent law (Law 1733/1987), competition law (Law 3959/2011), and the Civil Code.
FAQ
Franchising is a marketing and distribution system in which a franchisor grants a franchisee the right to use a proven business concept. The franchisee remains a legally independent trader who acts in its own name and for its own account, while being closely integrated into the franchisor's organizational and distribution network.
Greek law – like most continental European legal systems – does not have a separate franchise statute. The franchise agreement is therefore treated as an atypical, mixed contract and is subject primarily to the general civil-law principles of the Greek Civil Code and, where applicable, to European competition law.
The franchisee remains a legally independent trader who acts in its own name and for its own account, while being closely integrated into the franchisor's organizational and distribution network. Greek law – like most continental European legal systems – does not have a separate franchise statute. The franchise agreement is therefore treated as an atypical, mixed contract and is subject primarily to the general civil-law principles of the Greek Civil Code and, where applicable, to European competition law.
The aim of franchising is to build a uniform market presence through the cooperation of legally independent companies. Key elements are:
- The franchise package: includes know-how, brand rights, trade names, as well as technical and organizational support.
- Integration: the franchisee is integrated into the franchisor's existing customer and advertising network.
- Support: the franchisor provides ongoing advice, training, and assistance in equipping the business.
Greek legal practice and literature distinguish various forms:
- Distribution franchise: trading in the franchisor's products.
- Service franchise: provision of specific services according to established methods.
- Manufacturing franchise: production of goods according to the franchisor's specifications.
- Special forms: these include, among others, mixed franchising (a combination of goods and services distribution), partnership franchising (an equity stake by the franchisor in the franchisee's business), and partial franchising (use of third-party business premises, e.g. shop-in-shop models).
The franchise agreement is a continuing obligation and is legally classified as a mixed contract combining elements of various contract types (including licensing agreements, transfer of know-how, and agency for the conduct of business). It serves as a framework agreement establishing mutual duties of loyalty and performance between the parties.
- Form: The franchise agreement is not subject to any statutory formal requirement and may, in principle, be concluded without any particular form, including orally. For reasons of legal certainty and evidentiary purposes, however, a written form is strongly recommended – particularly for agreements containing non-competition clauses or territorial protection.
- Content: The agreement typically governs, in particular, the products or services covered by the contract, the distribution methods, the location, the remuneration (entry fee and ongoing franchise fees), and any non-competition obligations.
Obligations of the franchisor:
- granting of trademark and usage rights to the franchise concept,
- provision of a franchise manual and conducting of training,
- ongoing advice and support for the franchisee,
- where applicable, granting of territorial protection.
Obligations of the franchisee:
- payment of the entry fee and ongoing franchise fees,
- best possible personal effort to promote sales,
- maintaining confidentiality regarding the know-how provided,
- compliance with agreed non-competition obligations.
- Term: In practice, contract terms of around five years are common. Excessively long commitment periods (case law has, for example, called into question terms of 25 years) may, in individual cases, violate public policy (Arts. 178, 179 of the Greek Civil Code) or competition-law requirements – in particular Art. 5 of the Vertical Block Exemption Regulation (EU) 2022/720, under which post-contractual non-competition obligations should generally be limited to a maximum of one year – and may therefore be invalid or require adjustment.
- Extension: A contract extension may be expressly agreed or may arise implicitly from the continuation of the contractual relationship.
- Termination: The agreement typically ends through the expiry of time for fixed-term contracts, through ordinary termination subject to a reasonable notice period, or through extraordinary termination for good cause – for example, in the event of a material breach of contract by one of the parties.
No. Greece does not have an independent, codified franchise statute. The franchise agreement is treated as an atypical, mixed contract and is subject primarily to the general provisions of the Greek Civil Code and, in addition, to European competition law, in particular the Vertical Block Exemption Regulation (EU) 2022/720.
No, there is no statutory formal requirement – the agreement may, in principle, also be concluded orally. For reasons of legal certainty and evidentiary purposes, however – particularly with regard to non-competition clauses, territorial protection, and fee arrangements – the written form is strongly recommended.
Yes. The franchisee acts in its own name and for its own account as an independent trader. However, it is closely integrated, organizationally and economically, into the franchisor's distribution and advertising network.
A distinction is made in particular between distribution franchising (trading in goods), service franchising (provision of services according to fixed methods), and manufacturing franchising (production according to the franchisor's specifications). In addition, there are special forms such as mixed franchising, partnership franchising, and partial franchising.
Common fees include a one-time entry fee at the start of the agreement, as well as ongoing franchise fees, which are often calculated as a percentage of turnover. The precise arrangement is freely negotiable by contract.
In practice, terms of around five years are common. Excessively long commitment periods may violate public policy (Arts. 178, 179 of the Greek Civil Code) or competition-law requirements and may, in the event of a dispute, be invalid or require adjustment.
In principle, yes, but only within narrow limits. Under the European Vertical Block Exemption Regulation (EU) 2022/720, post-contractual non-competition obligations should generally be limited to a maximum of one year after termination of the agreement in order to remain unobjectionable under antitrust law.
The agreement ends through the expiry of time for fixed-term contracts, through ordinary termination subject to a reasonable notice period, or through extraordinary termination for good cause, for example in the event of a material breach of contract.
If the franchisor breaches material obligations – such as the promised training, advice, or provision of know-how – this may, depending on the severity of the breach, entitle the franchisee to extraordinary termination and to claims for damages.
Yes, definitely. Since franchise agreements vary considerably from case to case and there is no specific statutory regulation, the validity of non-competition clauses, territorial protection provisions, and termination provisions should in particular be legally reviewed before the agreement is concluded.