Buying a Franchise: The Cost of Removing Branding When the Agreement Ends

When buying a franchise, it is easy to calculate the cost of installing signage, fitting out the premises and purchasing initial stock. What is less obvious is how much it will cost to remove the branding when the agreement ends. Joining a franchise network should therefore involve a clear exit plan: what you must remove, what you may keep and how you will cover the costs without relying on an agreement being reached later.

1. List everything that carries the brand identity

The obligation to stop using the brand does not necessarily apply only to the sign outside. The agreement may require you to remove branding from shop windows, vehicles, workwear, packaging, menus and promotional materials. Check in particular whether this requirement also covers distinctive features of the premises’ interior design.

Before signing, ask for a detailed list. A phrase such as ‘remove all elements of the franchise identity’ leaves room for disputes over whether you need to replace only the branding or refit the entire outlet. Ask for a clear distinction between protected brand features, equipment belonging to the franchisor and your own equipment that can continue to be used once the branding has been removed.

The list should also cover digital touchpoints: the domain name, website, social media profiles, business directory listings and email addresses. For each item, establish who controls it and whether it must be closed down, renamed or transferred to the franchisor. The aim here is to remove the brand identity; any transfer of personal data requires a separate legal review.

Practical question for the franchisor: do the agreement and its schedules make it clear exactly how the premises and online presence should look once the relationship ends?

2. Agree deadlines and responsibility for carrying out the work

Distinguish between the point when your right to use the brand ends and the deadline for physically removing particular elements. A deadline for taking down signage does not, in itself, mean you may continue trading under the brand during that period. Any permitted transitional use must be expressly agreed.

Removing a large sign may require a contractor, access to the building’s façade and the property owner’s consent. Changing information on a third-party platform depends on that platform’s procedures. The agreement should therefore distinguish between actions you can take immediately and those requiring someone else’s co-operation.

Propose a written timetable setting out:

• which branding must no longer be used with immediate effect;
• the deadlines for removing physical elements;
• who approves the removal method and confirms completion;
• how to demonstrate that requests were submitted to third-party platforms on time;
• who pays for contractors, transport, storage and disposal of materials.

Avoid an arrangement under which the franchisor can commission work at your expense without a clearly defined procedure. If the franchisor has the right to step in because you have failed to act, negotiate requirements for prior notice, documentation of the necessary work and evidence of the actual costs. Access to the premises must also be consistent with your rights and obligations towards the property owner.

3. Separate stock, equipment and non-recoverable costs

Branded stock may cease to be usable in your business once the agreement ends. Do not assume that the franchisor must buy it back or that you may sell it off without restriction. Before signing, clarify whether the agreement provides a right to return stock, have it bought back or sell it off within a limited period.

If a buy-back is agreed, specify which stock is eligible, what condition it must be in, how the price will be calculated and who pays for delivery. Perishable goods, opened packs and outdated packaging may require different rules. Set a payment deadline too: a promise to buy back stock without a deadline does not address your need for cash when closing down.

For equipment, check ownership. Equipment you have bought, hired or been allowed to use will not all follow the same exit procedure. For your own equipment, ask whether the branding can be removed without affecting its functionality. For equipment belonging to someone else, agree the return arrangements and how its condition will be recorded.

Then prepare a separate exit budget. Include dismantling, repairs to surfaces, new unbranded packaging, removal and, where necessary, destruction of unusable materials. Obtain indicative quotes from contractors rather than estimating the cost solely by reference to the original installation price.

4. Review the agreement under Croatian law

Croatia has no specific franchise law, nor a dedicated mandatory system for standardised pre-contractual disclosure and registration of franchise offerings. A franchise agreement is an innominate contract — one not defined as a specific contract type in law — governed by the Croatian Civil Obligations Act, including its rules on performance of obligations, liability for damages and the ending of contractual relationships.

The Croatian Trade Mark Act is also relevant to the use of branding, alongside the applicable EU rules for European Union trade marks. Owning a physical item bearing the brand is not the same as having the right to present yourself as a member of the franchise network. Whether you may sell remaining products must therefore be checked separately against the agreement and the rules governing trade mark rights.

Ask a lawyer to review both the agreement and the schedules containing the fit-out requirements. They should check whether the obligations differ depending on whether the agreement expires, ends by mutual consent or is terminated, and whether costs are clearly allocated. Do not assume that any liability the franchisor may have for the agreement ending automatically entitles you to continue using the brand.

Practical takeaway: before signing, draw up a table with four columns: item, action, deadline and who pays. If any entry remains unclear, the exit costs are not yet sufficiently defined for you to make a purchasing decision.