Short answer
Rome I gives franchising its own named rule:
"a franchise contract shall be governed by the law of the country where the franchisee has his habitual residence" —
So absent a governing-law clause, a French franchisor granting a franchise to a Polish franchisee will normally find Polish law governs the agreement.
Parties are free to choose otherwise under Article 3, and most franchise networks do. But choosing the franchisor's law does not resolve the whole picture, because pre-contractual disclosure obligations are not governed by Rome I at all.
Rome I Article 1(2)(i) expressly excludes "obligations arising out of dealings prior to the conclusion of a contract". Those fall under Rome II, which routes them back through a different door. That split is the central practical point for franchising, where disclosure duties are among the most heavily regulated and most litigated features of the relationship.
The contract: Article 4(1)(e)
Like the distribution rule in Article 4(1)(f), the franchise rule protects the party whose performance characterises the relationship in the market — the franchisee who invests, operates the outlet and builds local goodwill.
Habitual residence is defined in Article 19 and is not the place of incorporation. For companies it is the place of central administration. Where the contract is concluded through, or performed by, a branch, agency or other establishment, Article 19(2) treats that establishment's location as the habitual residence. Article 19(3) fixes the relevant time as the conclusion of the contract, so a later relocation does not change the governing law retrospectively.
Two displacement routes exist:
- Article 4(2) applies where the contract is not covered by paragraph 1 or where its elements fall under more than one of points (a) to (h), pointing instead to the characteristic performer's habitual residence. Franchise agreements frequently bundle a trade-mark licence, know-how, supply arrangements, training and services — so this is a live question, not a formality.
- Article 4(3) allows displacement where the contract is manifestly more closely connected with another country. The threshold is high and deliberately exceptional.
Master-franchise structures deserve particular care. A master franchise agreement between the franchisor and a master franchisee, and the sub-franchise agreements between the master and local operators, are separate contracts that can each attract a different governing law under Article 4(1)(e).
Disclosure: the Rome II detour
Many Member States impose pre-contractual disclosure obligations on franchisors — requirements to provide specified information about the network, the franchisor's finances, the trade mark, the territory and projected performance, often a fixed number of days before signature, with sanctions ranging from damages to annulment of the contract.
These duties are typically characterised as pre-contractual. Rome I excludes them. Rome II picks them up:
"The law applicable to a non-contractual obligation arising out of dealings prior to the conclusion of a contract, regardless of whether the contract was actually concluded or not, shall be the law that applies to the contract or that would have been applicable to it had it been entered into." —
Article 12(1) therefore generally tracks the contract law — including a valid choice of law. Where that cannot be determined, Article 12(2) falls back to the country in which the damage occurs, or the parties' common habitual residence, or a manifestly more closely connected country.
Two practical consequences follow.
A choice-of-law clause can reach pre-contractual duties, because Article 12(1) refers to the law applicable to the contract. That is a reason to choose deliberately rather than by habit.
But it does not guarantee escape. Where a Member State treats its franchise-disclosure regime as overriding mandatory law, Rome II Article 16 preserves the forum's overriding mandatory provisions irrespective of the otherwise-applicable law. Some national franchise-disclosure statutes are expressly framed to apply to franchises operated in the territory.
A franchisor should therefore assume that the disclosure regime of the franchisee's country may apply whatever the contract says, and should comply with it rather than argue about it.
Other rules that do not follow the governing law
Franchising sits at an intersection of several regimes, and the governing law does not carry them all.
Competition law. Territorial exclusivity, resale-price provisions, non-compete obligations and online-sales restrictions are assessed under Article 101 TFEU and the Vertical Block Exemption Regulation, plus national competition law. Choosing a governing law does not change the competition analysis.
Trade marks. Infringement and validity follow the law of the territory of protection, and EU trade marks have their own regime. A licence clause governed by one law can still be enforced against infringement under another.
Property, leases and employment. Article 4(1)(c) locates rights in rem and tenancies of immovable property in the country where the property is situated. Employment relationships at the franchised outlet follow Rome I Article 8.
Termination protections. Some Member States extend agency-style or distributor-style indemnity and notice protections to franchisees, and these can operate as mandatory rules.
The result is that a single franchise relationship can properly involve the franchisee's law for the contract, the franchisee's country's disclosure statute, the territory's competition and trade-mark rules, and local employment and property law. That is not a drafting failure; it is the structure.
What franchisors should do
Choose the law expressly. The Article 4(1)(e) default is unlikely to be what a network wants, and leaving it unaddressed produces a different governing law per country.
Accept that the choice is a floor, not a wall. Plan for local disclosure compliance, local competition compliance and local termination protections regardless.
Build a per-country disclosure pack. Where the franchisee's country imposes disclosure, comply with its content requirements and its timing requirements, and keep proof of what was provided and when. Timing defects are a common ground of challenge.
Keep network documents consistent. A master franchise agreement, sub-franchise template, supply agreements and trade-mark licence that point to different laws will produce avoidable disputes.
Watch the master-franchise layer. The law governing the master agreement does not automatically govern the sub-franchises.
What franchisees should check
Which law actually governs, and whether the choice is genuine or boilerplate carried over from another jurisdiction.
Whether local disclosure duties were met. If the franchisee's country imposes a statutory disclosure regime with timing rules, non-compliance may be a remedy in itself irrespective of the governing law.
Whether protective rules apply on termination, under local law rather than the chosen law.
Where disputes must be brought. Jurisdiction is outside Rome I entirely — Article 1(2)(e) excludes choice-of-court agreements — and is governed by Brussels Ia or an arbitration agreement. A favourable governing law is of limited use if the forum is impractical.
Operational checklist
- Confirm the agreement is a franchise, not distribution, agency or a bare licence.
- Identify the franchisee's central administration and any contracting or performing branch.
- Fix habitual residence at the date of conclusion.
- Test Article 4(2) where the agreement bundles licence, supply, services and know-how.
- Treat Article 4(3) as exceptional.
- Analyse pre-contractual disclosure separately under Rome II Article 12.
- Check whether the franchisee's country's disclosure regime is overriding mandatory law.
- Run competition, trade-mark, property and employment analyses on their own rules.
- Align governing law across master, sub-franchise and ancillary documents.
- Settle jurisdiction separately from governing law.
Conclusion
Without a choice, a cross-border franchise agreement is governed by the law of the franchisee's habitual residence under Article 4(1)(e). Networks almost always choose otherwise, and they can.
The more useful insight is that the franchise relationship is not governed by one law. Rome I governs the contract; Rome II Article 12 governs pre-contractual dealings and generally tracks the contract law, but yields to overriding mandatory provisions; and competition, trade-mark, property and employment rules follow their own connecting factors entirely.
A franchisor expanding across the EU should plan for compliance country by country, and treat the governing-law clause as the beginning of the analysis rather than the end of it.
Sources
This article provides general legal information, not advice for a specific matter. Laws, facts and procedural deadlines may change the result. Follow the linked primary sources and obtain local advice before acting.