---
title: "CSDDD franchising and licensing scope FAQ"
canonical_url: "https://www.sorena.io/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/franchising"
source_url: "https://www.sorena.io/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/franchising"
author: "Sorena AI"
description: "FAQ on when franchise or licensing networks can fall within Article 2 of the EU CSDDD, including royalties, turnover, EU and non-EU treatment, and evidence."
published_at: "2026-05-09"
updated_at: "2026-05-09"
keywords:
  - "CSDDD franchising"
  - "CSDDD licensing"
  - "Article 2 scope"
  - "franchise royalties"
  - "EU CSDDD turnover"
  - "CSDDD"
  - "Directive (EU) 2024/1760"
  - "franchising"
  - "licensing"
  - "royalties"
  - "turnover thresholds"
---
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---

# CSDDD franchising and licensing scope FAQ

FAQ on when franchise or licensing networks can fall within Article 2 of the EU CSDDD, including royalties, turnover, EU and non-EU treatment, and evidence.

*FAQ* *CSDDD* *EU*

## CSDDD Article 2 franchising and licensing scope

The CSDDD has a specific Article 2 route for franchise and licensing networks, separate from the general employee and EUR 450 million turnover route.

Use this FAQ to test common identity, common business concept, uniform business methods, royalty amounts, turnover, EU versus non-EU treatment, and review evidence.

Directive (EU) 2024/1760 can cover a company, or the ultimate parent company of a group, through franchising or licensing agreements in the Union. The test is not triggered by every brand licence: Article 2 requires independent third-party agreements, royalties above a monetary threshold, a turnover threshold, and agreements that ensure a common identity, common business concept, and uniform business methods.

## When can franchising or licensing bring a company into CSDDD scope?

For EU companies, Article 2(1)(c) applies where the company, or the ultimate parent company of a group, has entered into franchising or licensing agreements in the Union with independent third-party companies. The agreements must be in return for royalties, must ensure a common identity, a common business concept, and uniform business methods, and the royalty and turnover thresholds must be met.

The monetary test is two-part. Royalties from those franchise or licensing agreements must amount to more than EUR 22.5 million in the last financial year for which annual financial statements have been or should have been adopted. The company, or group headed by the ultimate parent, must also have net worldwide turnover of more than EUR 80 million in that same financial year.

This is a separate scope route. A company can be outside the general Article 2(1)(a) route for companies with more than 1,000 employees and more than EUR 450 million net worldwide turnover, yet still need to test the franchise or licensing route if its brand network facts meet Article 2(1)(c).

- Check whether the agreements are franchising or licensing agreements in the Union with independent third parties.
- Confirm that royalties, not only ordinary sales revenue or service fees, exceed EUR 22.5 million for the relevant financial year.
- Confirm that net worldwide turnover exceeds EUR 80 million for the EU-company route.
- Document whether the test is met by the company alone or by the group through its ultimate parent company.

Sources for this answer:

- [Directive (EU) 2024/1760 Article 2 scope](https://eur-lex.europa.eu/eli/dir/2024/1760/oj?ref=sorena.io) - Supports the Article 2(1)(c) franchise and licensing scope route for EU companies, including royalties and worldwide turnover thresholds.
- [Directive (EU) 2024/1760 ELI text](https://data.europa.eu/eli/dir/2024/1760/oj/eng?ref=sorena.io) - Supports that franchise and licensing agreements can bring EU or non-EU companies into scope where royalty and turnover thresholds are met.

## What do common identity, common business concept, and uniform business methods mean in practice?

Article 2 does not treat a bare trademark permission as enough. The franchise or licensing agreements must ensure all three network features: common identity, common business concept, and uniform business methods.

In practice, review the contract package and operating model together. Common identity points to shared brand, trade name, visual identity, store concept, platform identity, or customer-facing presentation. Common business concept points to a replicated commercial model, product or service proposition, customer journey, or network format. Uniform business methods point to required operating manuals, quality standards, sourcing rules, technology stack, training, audit rights, or mandatory service processes.

The safer review position is to record the evidence for each of the three Article 2 features separately. If one feature is missing, explain why the agreement is ordinary IP licensing, distribution, agency, or supply rather than the CSDDD franchise/licensing scope route.

- Common identity: brand, marks, get-up, domain, app, shopfront, signage, or customer-facing network presentation.
- Common business concept: replicated commercial format, product or service model, pricing architecture, customer journey, or market proposition.
- Uniform business methods: mandatory manuals, operating standards, procurement rules, training, inspections, technology, data, or quality controls.
- Boundary note: keep evidence for negative conclusions as well as positive in-scope conclusions.

Sources for this answer:

- [Directive (EU) 2024/1760 Article 2 scope](https://eur-lex.europa.eu/eli/dir/2024/1760/oj?ref=sorena.io) - Supports the three required agreement features: common identity, common business concept, and uniform business methods.

## How does the CSDDD treat EU and non-EU franchise or licensing networks differently?

The franchise/licensing route exists for both EU companies and third-country companies, but the turnover geography differs. For EU companies, Article 2(1)(c) uses net worldwide turnover above EUR 80 million. For third-country companies, Article 2(2)(c) uses net turnover of more than EUR 80 million in the Union.

The royalty geography also differs. EU companies test whether royalties from qualifying franchising or licensing agreements amounted to more than EUR 22.5 million in the last financial year for which annual financial statements have been or should have been adopted. Third-country companies test whether those royalties amounted to more than EUR 22.5 million in the Union in the financial year preceding the last financial year.

For third-country companies, the CSDDD does not add an employee threshold. The Directive explains that the employee threshold is not used for third-country scope because the relevant worker concept is based on Union law and would create legal uncertainty outside the Union.

- EU company route: more than EUR 22.5 million royalties and more than EUR 80 million net worldwide turnover.
- Third-country route: more than EUR 22.5 million royalties in the Union and more than EUR 80 million net turnover in the Union.
- Group route: the same franchise/licensing test can apply where the ultimate parent company heads a group that meets the conditions.
- Competent authority evidence: for third-country companies, keep the branch and EU-turnover analysis because Article 2 and Article 24 connect supervision to EU presence and Union turnover.

Sources for this answer:

- [Directive (EU) 2024/1760 Article 2 scope](https://eur-lex.europa.eu/eli/dir/2024/1760/oj?ref=sorena.io) - Supports the EU and third-country franchise/licensing routes and the different worldwide versus Union turnover tests.
- [Directive (EU) 2024/1760 recitals 28 to 30](https://eur-lex.europa.eu/eli/dir/2024/1760/oj?ref=sorena.io) - Explains why third-country scope is based on Union turnover rather than an employee threshold.

## Did Directive (EU) 2025/794 change the franchising scope test?

The grounded material shows Directive (EU) 2025/794 as an amendment to Directive (EU) 2024/1760 and shows the Article 37 timing changes in the consolidated text. It does not show a change to the Article 2 franchise/licensing thresholds or the three network features.

For this FAQ, the practical consequence is simple: use current Article 37 timing when planning implementation waves, but do not change the Article 2 franchise/licensing scope test unless the consolidated legal text changes the scope wording itself.

The consolidated Article 37 text reflected in the grounding material sets Member State transposition by 26 July 2027 and application from 26 July 2028 for the first listed company cohorts, with all other listed Article 2 cohorts, including Article 2(1)(c) and Article 2(2)(c), from 26 July 2029.

- Use Article 2 to decide whether the franchise/licensing route is in scope.
- Use Article 37 to schedule when national transposing measures apply to the relevant cohort.
- Do not rely on old 2027 wave-one timing without checking the current consolidated text.
- Do not describe 2025/794 as changing the franchise/licensing thresholds unless a source supports that exact change.

Sources for this answer:

- [Consolidated EUR-Lex status for Directive (EU) 2024/1760](https://eur-lex.europa.eu/eli/dir/2024/1760/oj?ref=sorena.io) - Grounding records Directive (EU) 2025/794 as an amendment and shows consolidated Article 37 timing for CSDDD application waves.
- [European Commission CSDDD page](https://commission.europa.eu/business-economy-euro/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en?ref=sorena.io) - Supports the public timing context that transposition is planned for 26 July 2027 with full application on 26 July 2029.

## What evidence should a franchise or licensing group keep for a CSDDD scope review?

Keep evidence that lets a reviewer recalculate Article 2 without interviewing the original deal team. The file should connect legal agreements, royalty accounting, turnover data, group structure, and the operational features of the network.

The evidence should also show who owns follow-up if the business changes. Scope can change when a licensing programme adds operating manuals, a brand network expands in the Union, royalty lines are reclassified, a parent company changes, or turnover crosses the threshold for two consecutive financial years.

- Agreement inventory: current franchise and licence agreements in the Union, counterparties, independence of the third parties, territory, effective dates, and renewal status.
- Network-feature matrix: separate evidence for common identity, common business concept, and uniform business methods.
- Royalty calculation: royalty definitions, ledger extracts, consolidation adjustments, currency treatment, and whether the EUR 22.5 million threshold is met.
- Turnover calculation: worldwide turnover for EU companies or Union turnover for third-country companies, including group consolidation where relevant.
- Parent-company analysis: whether the company itself or the ultimate parent company of a group meets the route.
- Timing note: the Article 37 cohort and the national transposition status being monitored.
- Change log: contract, brand, operating model, royalty, turnover, group, and EU-market changes that could alter the conclusion.

Sources for this answer:

- [Directive (EU) 2024/1760 Article 2 scope](https://eur-lex.europa.eu/eli/dir/2024/1760/oj?ref=sorena.io) - Supports the records needed to evidence Article 2 scope: agreement type, royalties, turnover, group status, and EU versus third-country treatment.
- [Directive (EU) 2024/1760 Article 15 monitoring](https://eur-lex.europa.eu/eli/dir/2024/1760/oj?ref=sorena.io) - Supports keeping the scope conclusion under review when significant changes or new risk grounds arise.

## What mistakes matter most for CSDDD franchising and licensing analysis?

The most common mistake is treating every licence as in scope or every licence as out of scope. Article 2 asks a narrower factual question: does the agreement create the kind of controlled network described by common identity, common business concept, and uniform business methods, and are the royalty and turnover thresholds met?

A second mistake is mixing EU and non-EU calculations. EU companies test worldwide turnover for the EUR 80 million franchise/licensing route; third-country companies test Union turnover. The royalty calculation is also Union-specific for third-country companies.

A third mistake is using the general EUR 450 million turnover threshold as if it replaced the franchise/licensing route. Article 2 contains both routes. A brand owner below the general scope threshold may still need a franchise/licensing analysis if royalties and turnover meet Article 2(1)(c) or Article 2(2)(c).

- Do not count every payment under a licence as royalties without checking the agreement and accounting treatment.
- Do not ignore operating manuals, quality audits, training, technology mandates, or procurement standards when assessing uniform business methods.
- Do not use worldwide turnover for a third-country company where Article 2 requires Union turnover.
- Do not treat 2025 timing changes as a change to Article 2 thresholds unless the current legal text says so.
- Do not leave negative scope conclusions undocumented; future expansions can make the same network in scope later.

Sources for this answer:

- [Directive (EU) 2024/1760 Article 2 scope](https://eur-lex.europa.eu/eli/dir/2024/1760/oj?ref=sorena.io) - Supports the distinction between the general scope route and the separate franchise/licensing scope route.
- [Directive (EU) 2024/1760 ELI text](https://data.europa.eu/eli/dir/2024/1760/oj/eng?ref=sorena.io) - Supports the high-level scope summary for EU and non-EU companies, including the franchise/licensing thresholds.

## Primary sources

- [Directive (EU) 2024/1760 on corporate sustainability due diligence](https://eur-lex.europa.eu/eli/dir/2024/1760/oj?ref=sorena.io) - Primary legal text for CSDDD Article 2 franchise and licensing scope, Article 15 monitoring, Article 27 penalties, and Article 37 timing.
  - Quote: "franchising or licensing agreements in the Union"
- [Directive (EU) 2024/1760 ELI text](https://data.europa.eu/eli/dir/2024/1760/oj/eng?ref=sorena.io) - Official ELI text supporting the franchise/licensing threshold overview for EU and non-EU companies.
  - Quote: "royalties of more than EUR 22.5 million"
- [European Commission corporate sustainability due diligence page](https://commission.europa.eu/business-economy-euro/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en?ref=sorena.io) - Official Commission page supporting the 2025 timing context for transposition and full application.
  - Quote: "full application on 26 July 2029"

## Topic Guides

- [CSDDD adverse impact prioritisation workflow](/artifacts/eu/corporate-sustainability-due-diligence-directive/adverse-impact-prioritisation-workflow.md): A CSDDD workflow for identifying actual and potential adverse human rights and environmental impacts, ranking severity and likelihood, and documenting prevention, mitigation, remediation, and stakeholder evidence.
- [CSDDD Applicability Test: EU and Non-EU Company Scope](/artifacts/eu/corporate-sustainability-due-diligence-directive/applicability-test.md): Test whether Directive (EU) 2024/1760 may apply to an EU or non-EU company using grounded CSDDD employee, turnover, group, franchise, royalty, exclusion, and phase-in checks.
- [CSDDD chain of activities and supplier due diligence](/artifacts/eu/corporate-sustainability-due-diligence-directive/chain-of-activities-and-suppliers.md): Explain CSDDD chain-of-activities scope, upstream and downstream boundaries, subsidiaries, direct and indirect business partners, supplier risk segmentation, and evidence.
- [CSDDD Chain of Activities Boundaries](/artifacts/eu/corporate-sustainability-due-diligence-directive/chain-of-activities-boundaries.md): Define CSDDD upstream and downstream chain of activities boundaries for subsidiaries, direct and indirect business partners, distribution, transport, storage, and records.
- [CSDDD chain of activities boundaries: upstream and downstream FAQ](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/chain-of-activities-boundaries.md): FAQ on how the CSDDD defines chain of activities boundaries for subsidiaries, direct and indirect business partners, upstream activities, downstream logistics, and evidence.
- [CSDDD civil liability under Article 29: what companies should check](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/civil-liability.md): FAQ on CSDDD Article 29 civil liability: liability conditions, protected legal interests, causation, compensation, limitation periods, and evidence disclosure.
- [CSDDD Climate Transition Plan Requirements](/artifacts/eu/corporate-sustainability-due-diligence-directive/climate-transition-plan.md): Article 22 CSDDD guidance for climate transition plans: business model alignment, targets, actions, funding, governance, and 12-month progress updates.
- [CSDDD complaints and notifications FAQ](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/complaints.md): FAQ on Article 14 CSDDD complaint and notification mechanisms, who may complain, follow-up rights, confidentiality, retaliation, and evidence.
- [CSDDD compliance duties and evidence guide](/artifacts/eu/corporate-sustainability-due-diligence-directive/compliance.md): A grounded CSDDD compliance guide covering due diligence policy, adverse impact identification, prevention, corrective action, complaints, monitoring, reporting, climate plans, and supervisory evidence.
- [CSDDD contractual assurances FAQ for Articles 10 and 11](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/contractual-assurances.md): How CSDDD Articles 10 and 11 use contractual assurances with business partners, verification, SME support, action plans, and suspension or termination escalation.
- [CSDDD deadlines and compliance calendar after Directive (EU) 2025/794](/artifacts/eu/corporate-sustainability-due-diligence-directive/deadlines-and-compliance-calendar.md): Current CSDDD calendar for transposition, application phases, Article 16 reporting exceptions, Commission guidance dates, and practical compliance evidence.
- [CSDDD due diligence checklist](/artifacts/eu/corporate-sustainability-due-diligence-directive/checklist.md): A grounded CSDDD checklist for scope, due diligence policy, chain-of-activities risk mapping, impact prioritisation, action plans, complaints, monitoring, communication, climate planning, and evidence.
- [CSDDD Due Diligence Steps Playbook for Articles 5 and 7-16](/artifacts/eu/corporate-sustainability-due-diligence-directive/due-diligence-steps-playbook.md): A grounded playbook for the CSDDD due diligence sequence: policy integration, impact assessment, prioritisation, prevention, correction, remediation, stakeholder engagement, complaints, monitoring, communication, and evidence.
- [CSDDD FAQ: scope, dates, duties, liability, and evidence](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq.md): Practical answers on CSDDD scope, current application dates, chain of activities, due diligence duties, complaints, remediation, civil liability, climate plans, and evidence.
- [CSDDD grievance and remediation workflow guide](/artifacts/eu/corporate-sustainability-due-diligence-directive/grievance-and-remediation-workflows.md): Build a CSDDD grievance, notification, stakeholder engagement, and remediation workflow around Articles 12, 13, and 14 of Directive (EU) 2024/1760.
- [CSDDD Liability and Penalties: enforcement, fines, and civil claims](/artifacts/eu/corporate-sustainability-due-diligence-directive/liability-and-penalties.md): A grounded guide to CSDDD supervisory enforcement, penalty mechanics, civil liability, compensation limits, evidence records, and national transposition caveats.
- [CSDDD non-EU turnover threshold FAQ](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/non-eu-turnover.md): How non-EU companies should assess CSDDD scope using EU-generated turnover, group thresholds, authorised representative records, and competent authority evidence.
- [CSDDD Non-EU Turnover Thresholds and Scope Waves](/artifacts/eu/corporate-sustainability-due-diligence-directive/scope-waves-and-non-eu-turnover.md): Article 2 and Article 37 CSDDD scope guide for non-EU Union turnover, group routes, franchise and licensing routes, and current application dates after Directive (EU) 2025/794.
- [CSDDD Omnibus timing changes after Directive (EU) 2025/794](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/omnibus-current-date-changes.md): FAQ answer on current CSDDD Article 37 dates after Directive (EU) 2025/794 and how to separate adopted timing changes from proposal-stage Omnibus simplification.
- [CSDDD penalties and fines under Article 27](/artifacts/eu/corporate-sustainability-due-diligence-directive/penalties-and-fines.md): How CSDDD Article 27 sets penalty rules, turnover-based fine caps, public decision publication, supervisory authority powers, and national transposition caveats.
- [CSDDD prevention vs mitigation: potential and actual adverse impacts](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/prevention-vs-mitigation.md): CSDDD FAQ on when to prevent or mitigate potential adverse impacts, when to end or minimise actual adverse impacts, and what evidence records to keep.
- [CSDDD remediation FAQ: when companies must remedy adverse impacts](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/remediation.md): FAQ on CSDDD remediation: when Article 12 requires remedy, how complaints and stakeholder engagement affect the response, and what evidence to keep.
- [CSDDD Remediation Plan Template: Article 12, 13 and 14 evidence](/artifacts/eu/corporate-sustainability-due-diligence-directive/remediation-plan-template.md): A CSDDD remediation plan template for actual adverse impacts, complaint inputs, stakeholder engagement, action records, and monitoring evidence.
- [CSDDD requirements: scope, due diligence, climate plan, and evidence](/artifacts/eu/corporate-sustainability-due-diligence-directive/requirements.md): A grounded map of the Corporate Sustainability Due Diligence Directive requirements across scope, due diligence policy, impact assessment, complaints, remediation, monitoring, communication, and climate transition planning.
- [CSDDD risk prioritisation FAQ: severity, likelihood, and evidence](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/risk-prioritisation.md): How to prioritise CSDDD adverse impacts when teams cannot address everything at once, using severity, likelihood, stakeholder evidence, and a reviewable rationale.
- [CSDDD Scope Thresholds: EU, Non-EU, Group and Franchise Routes](/artifacts/eu/corporate-sustainability-due-diligence-directive/scope-thresholds-and-in-scope-groups.md): Article 2 CSDDD scope thresholds for EU companies, non-EU Union turnover, ultimate-parent groups, franchise and licensing routes, consecutive-year tests, and evidence records.
- [CSDDD scope waves: current Article 37 dates and thresholds](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/scope-waves.md): FAQ on the current CSDDD phase-in after Directive (EU) 2025/794: 26 July 2028, 26 July 2029, Article 2 scope thresholds, and evidence to retain.
- [CSDDD Supplier Contract Clause Review Workflow](/artifacts/eu/corporate-sustainability-due-diligence-directive/supplier-contract-clause-review-workflow.md): Review supplier contract clauses against CSDDD Articles 10 and 11: contractual assurances, verification, SME fairness, support, action plans, and escalation evidence.
- [CSDDD Supplier Contract Clauses: Articles 10 and 11 Evidence](/artifacts/eu/corporate-sustainability-due-diligence-directive/supplier-contract-clauses.md): How to use CSDDD supplier contract clauses without treating clauses as a substitute for due diligence: contractual assurances, verification, SME support, action plans, limits, and evidence.
- [CSDDD supplier human rights impact scoring template](/artifacts/eu/corporate-sustainability-due-diligence-directive/supplier-human-rights-risk-scoring-template.md): A CSDDD supplier impact scoring template for Article 8 identification, Article 9 prioritisation, severity, likelihood, stakeholder input, chain-of-activities boundaries, and evidence records.
- [CSDDD transition plans FAQ: Article 22 climate plan requirements](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/transition-plans.md): FAQ on CSDDD Article 22 climate transition plans: targets, decarbonisation levers, investment and funding, governance, CSRD overlap, and evidence records.
- [CSDDD vs CSRD: Due Diligence and Reporting Compared](/artifacts/eu/corporate-sustainability-due-diligence-directive/csddd-vs-csrd.md): Compare CSDDD due diligence duties with CSRD sustainability reporting, including scope, timing, Article 16 reporting, evidence overlap, assurance, and enforcement.
- [CSDDD vs German LkSG Comparison](/artifacts/eu/corporate-sustainability-due-diligence-directive/csddd-vs-german-lksg.md): Compare the EU CSDDD with Germany's LkSG without mixing directive duties, national-law duties, chain boundaries, complaints, reporting, and enforcement routes.
- [CSDDD vs OECD Guidelines](/artifacts/eu/corporate-sustainability-due-diligence-directive/csddd-vs-oecd-guidelines.md): Compare the binding EU CSDDD with the OECD Guidelines for responsible business conduct across scope, due diligence duties, business relationships, remediation, and evidence.
- [How CSDDD overlaps with OECD, UNGP, and ILO standards](/artifacts/eu/corporate-sustainability-due-diligence-directive/faq/oecd-ungp-and-ilo-overlap.md): FAQ on how OECD responsible business conduct guidance, the UN Guiding Principles, and ILO labour standards inform CSDDD due diligence without being the same legal instrument.

*Recommended next step*

*Placement: after evidence section*

## Check CSDDD franchise scope with evidence

Review franchise and licensing contracts, royalties, turnover, and group structure against the CSDDD Article 2 route before finalising scope conclusions.

- [Open Research Copilot](/solutions/research-copilot.md): Review CSDDD scope questions against cited source material.
- [Discuss CSDDD implementation](/contact.md): Review franchise scope, source evidence, and implementation planning with Sorena.


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