Franchise royalties in Belarus: what to check before you buy

A low royalty rate does not necessarily mean an affordable franchise. The total cost depends on the amount used to calculate the payment, when the obligation to pay begins and which fees are added on top. Transparent calculations help build lasting relationships in franchising. Anyone buying a franchise in Belarus should check not just the percentage quoted in the sales presentation, but the entire charging mechanism — before signing the agreement or transferring any money.

1. Establish what you are paying for and when payments begin

Franchising in Belarus is specifically regulated by the Civil Code: Article 910 describes the comprehensive business licence agreement, the legal form used for franchising, while Article 910-1 sets out its form and registration requirements. There is no separate franchising law, but this does not mean there are no specific rules. The agreement must be in writing and registered with the patent authority — the National Centre of Intellectual Property. Failure to comply with the registration requirement renders the agreement invalid.

Remuneration may take the form of one-off or recurring fixed payments, a share of revenue or another agreed arrangement. A royalty is therefore not necessarily a monthly percentage: what matters is the wording of the agreement, not the label commonly given to the payment.

Draw up a list of all payments to the franchisor and its associated suppliers. List the initial franchise fee, recurring remuneration, advertising contributions, software, training and mandatory paid inspections separately. For each item, record the recipient, the basis for the charge, the payment deadline and whether the price can change.

The date on which charges begin to accrue is particularly important. Signing the agreement, registering it, gaining access to the system and opening the outlet are separate events. Propose linking recurring charges to a clear milestone that can be documented. Separately agree what happens if opening is delayed for reasons within the franchisor’s control. Do not assume that having no sales automatically exempts you from a fixed payment.

2. Define the basis for calculating royalties

The phrase ‘a percentage of turnover’ is not precise enough for financial planning. Ask for the calculation basis to be defined so that an accountant and a manager would independently arrive at the same result. Even a small ambiguity will recur in every billing period.

The agreement or a schedule to it should answer the following questions:

• Is VAT included if the franchisee is registered for VAT?
• Is the calculation based on payments actually received or on the value of goods and services sold?
• How are returns, cancelled orders and adjustments relating to previous periods treated?
• Do discounts reduce the calculation basis, and who bears their cost?
• Are sales through an aggregator platform counted before or after its commission is deducted?
• When are advance payments, gift vouchers and voucher redemptions counted?
• Are delivery charges and sales of products outside the franchise included?

There is no single commercial solution that suits every business. What matters is that the chosen approach is consistent with the agreement and prevents double charging — for example, charging both when a gift voucher is sold and when it is redeemed against a purchase.

Ask the franchisor to prepare a sample calculation for a hypothetical month that includes a return, a discount and a sale through an intermediary. Review it with your accountant. The final calculation method is best set out in a schedule to the agreement, rather than left solely in correspondence between managers.

If amounts are linked to a foreign currency, clarify the currency in which the obligation is denominated, the payment currency, the exchange-rate source and the conversion date. If the franchisor is based abroad, check the applicable currency and tax requirements separately with your bank and a tax adviser: the contractual amount may differ from the full cost of making the payment.

3. Check minimum payments and additional fees

A clause requiring ‘a percentage of revenue, subject to a minimum amount’ changes the economics of a slow month. When sales fall, the payment no longer decreases in proportion to receipts. Also clarify whether the fixed amount is a minimum credited against the percentage-based royalty or a separate charge payable on top of it.

Prepare month-by-month calculations for three scenarios: trading at the planned level, a slow build-up in sales and a temporary shutdown. For each, add together royalties, advertising contributions, mandatory subscriptions and other recurring fees. Then compare the total with revenue and the cash remaining after operating expenses.

This calculation shows not only profitability, but also working capital needs. A royalty payment may fall due before an aggregator transfers your money or a corporate customer settles an invoice. You need to allow for this gap in your start-up budget.

For the advertising fund, ask what the money will be spent on, how spending will be reported and how local campaigns are approved. A mandatory contribution does not, in itself, guarantee a particular number of customer enquiries. For software, establish how many users and workstations the tariff covers and which updates cost extra.

4. Agree checks on charges and limits on changes

Payment predictability depends on whether the franchisor can change its charges through internal rules. Check every document referred to in the agreement. If a fee is set by a separate price list, specify the version that applies and the procedure for subsequent changes.

Propose agreeing a notice period, a review frequency and an objective indexation mechanism. These are terms to negotiate, not protections automatically granted to the franchisee. Amendments to the agreement also require attention to registration rules: check the formalities with a Belarusian lawyer in advance.

Provide for a monthly calculation showing a breakdown of the calculation basis, along with deadlines for reconciling figures and correcting errors. Clarify which documents the franchisor is entitled to inspect and who will have access to the accounting system. Separately agree a procedure for disputing charges and the consequences of late payment; do not assume that raising an objection automatically suspends the obligation to pay.

The practical takeaway: before buying a franchise, obtain a complete list of fees, test the royalty formula against several scenarios and set it out in the agreement. If you cannot independently reproduce the payment calculation from the documents, the charging mechanism is not yet ready to be signed off.