Initial franchise fees in Belarus: what to check before paying

When buying a franchise, you may be asked to make the first substantial payment before you have even received the final contract. It may be called an initial franchise fee, a package fee or a payment to reserve a place in the network. What matters is not the label, but what the money is for: what obligations the recipient takes on, when they must fulfil them, and what happens if the purchase falls through. Here is how to assess that initial payment without confusing it with ongoing royalties.

1. Establish exactly what you are paying for

An initial franchise fee is the common business term for a one-off payment made when acquiring a franchise. The term itself does not explain the franchisor’s obligations, nor does it mean that the money is automatically refundable or, conversely, that the recipient can always keep it.

In Belarus, franchising is specifically regulated by the Civil Code, although there is no separate franchising law. Article 910 provides for a comprehensive business licence agreement: the rights holder grants the user a package of licensed rights for business purposes in return for payment. That payment does not necessarily have to take the form of a single upfront fee.

Ask for a breakdown of the proposed amount. It may cover the grant of a package of rights, initial training, plans for the outlet or other agreed activities. However, a single franchise arrangement should not be artificially split into a set of services merely to make payment easier: the legal structure should reflect the actual relationship.

Draw up a simple table with four columns:

• payment component;
• the rights holder’s obligation;
• deadline for performance;
• document or other means of confirming delivery.

If the entire amount is described as a fee for ‘joining the network’, ask exactly what the franchisee will receive in return. ‘Access to a successful business’ is not specific enough to assess whether obligations have been met. Also clarify which costs are excluded, such as travel to training, staff accommodation, equipment set-up or additional training sessions.

2. Separate a reservation payment from the franchise purchase

Before the main agreement is signed, the seller may ask you to pay to reserve a city territory or a place in the launch queue. Do not assess this payment solely on a sales manager’s promise that ‘it will all be credited later’. You need written terms that explain what the reservation arrangement itself achieves.

Before transferring any money, establish:

• who receives the payment and on what basis;
• exactly what is being reserved and for how long;
• what the recipient undertakes not to do during that period;
• the conditions for proceeding to the main agreement;
• whether the full amount will be credited towards the initial fee;
• when and how the money will be refunded.

Paying a reservation fee before receiving a draft agreement is particularly risky. You do not yet know your future obligations, but you already risk losing money if you refuse to accept them. A practical negotiating position is to obtain the agreement and its schedules first, agree the reservation terms next, and only then pay.

The terms ‘advance payment’, ‘earnest money deposit’ and ‘security payment’ should not be used interchangeably. Their legal consequences depend on the substance of the arrangement and the applicable rules. Have a Belarusian lawyer check the proposed structure before you pay, particularly if the seller claims an unconditional right to retain the money whenever the buyer withdraws.

3. Link payments to clear milestones

Under Article 910-1 of the Civil Code, a franchise agreement must be in writing and registered with the patent authority. In Belarus, registration is handled by the National Centre of Intellectual Property. Paying the fee does not replace either the agreement or the mandatory registration.

This matters when setting the payment schedule: a bank receipt should not be treated as proof that all the legal requirements for launch are in place. The agreement should specify when the initial fee becomes payable and what must happen before each payment is due.

You could propose staged payments, for example:

• an agreed portion after signing the agreement;
• the next portion after registration has been confirmed;
• the balance after the specified start-up obligations have been fulfilled.

This is a matter for negotiation, not a universal payment structure prescribed by law. If the franchisor insists on full payment upfront, assess how well the agreement protects you against delays or incomplete performance.

Set verifiable criteria for each deliverable you pay for. For training, these might include the programme, duration, participants and evidence that it took place. For outlet plans, specify the materials to be supplied and how they will be handed over. Avoid a clause deeming the entire start-up package accepted as soon as the agreement is signed, even though it has not yet been delivered.

4. Agree what happens to the money if the launch falls through

It is best to discuss refunds before paying, while both parties can calmly agree how to allocate the risks. The issue here is not leaving an established network, but recovering the initial fee when the purchase or launch preparations have stalled.

Consider several situations separately: the rights holder fails to fulfil its start-up obligations; documents need correcting for registration; the parties cannot agree the final contract after a reservation payment; or the buyer decides to abandon the project. Do not assume that the same refund rule applies in every case.

If the recipient may retain payment for work already completed, agree how that amount will be calculated and what supporting documents will be required. Wording such as ‘less the franchisor’s expenses’, without further detail, leaves too much uncertainty. Also specify the refund deadline, how to submit a refund request, and the bank details for repayment.

Keep the agreement, schedules, payment records and correspondence about what the fee covers. However, put key promises directly into the agreement: correspondence is no substitute for clear payment terms.

Practical takeaway: before transferring any money, you should have written answers to three questions: what are you paying for, how will performance be confirmed, and how will any refund be calculated? If even one answer remains purely verbal, it is sensible to postpone payment.