Using an Agent or Distributor
Qualified Austrian agents and distributors exist for nearly every kind of product or service. Because of Austria’s geographic location and history, many Austrian agents and distributors sell regionally, covering markets in Central and Eastern Europe in addition to Austria.
Companies seeking distribution, franchising, and agency arrangements should ensure that the agreements they put into place are in accordance with EU and member state national laws. Council Directive 86/653/EEC establishes certain minimum standards of protection for self-employed commercial agents who sell or purchase goods on behalf of their principals. The Directive establishes the rights and obligations of the principal and its agents, the agent’s remuneration and the conclusion and termination of an agency contract. It also establishes the notice to be given, and indemnity or compensation to be paid to the agent. U.S. companies should be particularly aware that according to the Directive, parties may not deviate from certain requirements. Accordingly, the inclusion of a clause specifying that an alternate body of law be applied in the event of a dispute, will likely be ruled invalid by European courts.
Establishing an Office
The Austrian government has progressed somewhat in streamlining its complex and cumbersome requirements for business licenses and permits, establishing a “one-stop shop” for business permits, but this does not facilitate services related to securing plant construction or building permits. U.S. companies that plan to expand their business to Austria need to choose the adequate form of enterprise. The set-up process for a branch, which is no independent legal entity, generally includes the following steps:
- entry in the companies’ register
- registration of the trade
- announcement of the appointment of the Managing Director(s) under Trade Law
- notice of business operations to the revenue authorities
- registration of employees with social security.
The incorporation process for a subsidiary, which is a legally autonomous structure, requires some additional steps. The Austrian government’s official investment promotion agency, “Austrian Business Agency (ABA)” offers complimentary information and expert advice on all subjects related to opening an office or a production facility in Austria. ABA can also provide information on Austrian government programs to facilitate new investments and R&D especially in priority industries such as life sciences and technology. ABA’s Americas Director Michaela Laussegger can be reached at: m.laussegger@aba.gv. In addition, each of the Austrian provinces maintain official investment offices. All licensed businesses in Austria (including foreign-owned enterprises) must be members of Austria’s Economic Chamber (WKO – Wirtschaftskammer Österreich) and pay compulsory dues. For more information, please refer to the State Department’s Investment Climate Statement which includes details on establishing and operating an office as well as hiring employees: https://www.state.gov/reports/2023-investment-climate-statements/austria/ .
Franchising
Franchising accounts for an estimated 5% of retail sales in Austria. Approximately 505 franchise systems with over 12,000 locations currently operate in Austria. According to the most recent Austrian Franchise Association data available, their net revenues totaled approximately $11.8 billion in 2023. Around 68% of franchise businesses operating in Austria are locally owned. The leading foreign participants in the Austrian franchising economy are German companies, with around 14% of franchises, followed by the United States and Canada with a combined total of about 3% of franchises. Most German franchises either set up headquarters in Austria or franchise directly over the border. Most U.S. franchisers, on the other hand, choose to expand their operations in Austria through a master franchise partner, an approach that is still not commonly practiced in the market.
U.S. businesses pursuing franchise opportunities within the European Union will likely find that the market is quite robust and friendly to franchise systems in general. Many Austrian business and consumer trends begin in Germany; therefore, establishing a U.S. franchise first in Germany before expanding to Austria can be a solid strategy. EU franchise regulations are fairly broad and can be found at European Franchise Federation website https://eff-franchise.com/. While there is no specific Austrian franchise law, existing commercial laws can affect franchise business. Agreements should detail the rights and obligations of the franchise partners including contract period, trademark law and competition law, location, marketing strategy and franchise fees. In addition, mandatory legal provisions such as anti-trust law should be considered.
The Austrian Franchise Association (Österreichischer Franchise-Verband) maintains an informative website and co-organizes seminars as well as trade shows such as the Franchise Expo taking place annually in Frankfurt.
The European Franchise Federation is the leading advocate for the franchise industry in Europe.
Direct Marketing
Austrian law prohibits most forms of direct marketing without prior explicit consent of the individual or business being contacted. Even those who consent can withdraw their approval at any time. Furthermore, electronic communications must contain certain elements, such as information about how to opt-out and the sender’s identity. A more thorough review of the federal and EU regulations can be found on the Austrian Regulatory Authority for Broadcasting and Telecommunications website. The EU General Data Protection Regulation (GDPR) has been governing the EU’s data protection policy since May 2018, applying to all businesses processing EEA citizens’ personal data. For details on the GDPR and EU regulations regarding direct marketing, please consult the https://www.trade.gov/country-commercial-guides/eu-market-overview?section-nav=2950
In March 2022, the United States and the European Commission announced that they have agreed in principle on a new Trans-Atlantic Data Privacy Framework (DPF), which will foster trans-Atlantic data flows and enable trans-Atlantic commerce in all sectors of the economy, including for small and medium enterprises.
Regular updates on this framework are published on DOC-run Privacy Shield website.
Joint Ventures/Licensing
Joint ventures and licensed production arrangements in Austria can be an attractive strategy for U.S. firms looking for partners in Europe. In part due to its central geographic location and qualified workforce, Austria is considered an important business hub between eastern and western Europe and beyond. Joint ventures can take on different legal structures including corporation, partnership, and LLC.
Austrian companies are receptive to licensing arrangements, especially as a source of new technology. Royalty and license fee payments can be freely transferred. Details on intellectual property protection in Austria can be found in the https://www.state.gov/reports/2023-investment-climate-statements/austria/. In addition to the assistance offered by the U.S. Commercial Service in Austria, U.S. firms seeking joint venture or license partners in Austria can receive valuable information and support from the Austrian Government’s investment organization, the Austrian Business Agency.
Express Delivery
Express delivery is widely available and the well-known multinational service providers including Federal Express, UPS, DHL, as well as the Austrian post office all offer reliable service.
Due Diligence
The Austrian economy is highly regulated, which means that controls exist against fraud; however, they do not stop all fraudulent activity. Due diligence is important in Austria, as it is everywhere. Basic information on a company, such as confirmation of registration and confirmation that no bankruptcy proceedings are in process, is readily available from official and semi-official sources. Commercial background checks on Austrian companies can be obtained by carrying out an International Company Profile. Please contact the U.S. Commercial Service in Austria, who can assist you in performing your Due Diligence.