Buying a franchise: do you have to run the business yourself?

A well-known brand does not mean you can invest your money and leave others to run the business. Some franchise networks expect owners to be involved every day, while others allow an employed manager to take charge. Before choosing a brand, clarify whether you are buying a job you will do yourself or a business you can run through a team. That distinction affects your choice of franchise, your costs and the terms of your agreement.

1. Compare the expected role with what you can commit to

Start with your own schedule, not the brand’s offer. Write down how much time you can realistically devote to the business, whether you want to keep your current job and whether you can be available outside the outlet’s opening hours. Distinguish day-to-day management from occasional reviews of performance: recruitment, staff rotas, complaints and staff absences require someone with the authority to make decisions immediately.

Ask the franchisor to describe a franchisee’s typical working week. The term ‘active owner’ is not precise enough. Ask whether it means serving customers, managing staff, local sales, administration or all of these.

For every brand on your shortlist, answer the same questions:

• Must the owner be present at the outlet, and for how much of the time?
• Can the owner run another business at the same time?
• Which tasks can a manager take on, and which must the owner handle personally?
• Who must complete training and attend compulsory meetings?
• Do expectations differ between the opening period and ongoing operations?

Turn the answers into a list of specific obligations. If the expected commitment does not fit your life, brand recognition will not make up for it.

2. Check what the agreement requires of the owner and manager

Croatia has no dedicated franchise law or general franchise-specific regime requiring pre-contractual disclosure. The contractual relationship is governed by the Croatian Civil Obligations Act, while the Competition Act and applicable European Union competition rules are also relevant. The Labour Act applies to the employment of managers and other staff.

This does not mean the relationship is unregulated. Rather, it means that requirements for personal involvement need to be clearly set out in the agreement. Do not assume that the absence of a dedicated franchise law automatically gives you the right to have someone else run the business. Equally, inclusion in the Croatian Chamber of Economy’s (HGK) Franchise Register is neither a government licence nor confirmation that a particular model suits you.

Look through the draft agreement for clauses on personal involvement, the designated key person, training, staff approval and breaches of obligations. Check whether the requirements apply directly to you or to the company entering into the agreement. Even if you sign through a company, your personal involvement may still be required under a separate contractual provision.

If a manager is permitted, ask for the required qualifications, approval process and deadline for the franchisor’s response to be set out in writing. Clarify who pays for the manager’s training as well. Any verbal promise that ‘the owner does not have to be present’ should be reflected in the agreement and operating rules before you sign.

3. Calculate the cost of operating without your day-to-day involvement

A franchise may look financially attractive if the plan assumes that the owner works full-time without including any pay for that work. That picture does not suit a buyer who intends to employ a manager. Prepare two versions of the same operating plan: one in which you work in the business every day, and another with a paid manager.

In the second version, your accountant should include the total employment cost, not just take-home pay. Add recruitment costs, initial training, travel where necessary, and cover for annual leave and other absences. Check whether one person can realistically handle all the management tasks within legally permitted working hours.

Do not treat your own labour as free in the first version either. Set an amount you need to cover your personal living costs, and distinguish payment for your work from a return on your invested capital. How you receive that money will depend on the business’s legal structure and your status.

The key question is: can the business afford to pay someone to do the work you would otherwise do yourself? If not, you are choosing self-employment with franchise support, rather than an investment that requires little of your time.

4. Agree on cover before it becomes urgent

Illness, family circumstances or a manager’s departure can disrupt the agreed management arrangements. Before buying, clarify how the outlet will continue operating when the key person is unavailable. Do not assume that the franchisor will automatically send someone to cover.

Negotiate a procedure for appointing a temporary manager, mandatory training for the replacement and a reasonable period for finding a permanent solution. If the franchisor’s prior approval is required, the agreement should explain what happens while you wait for it. Distinguish a short-term absence from a permanent end to your personal involvement.

Pay particular attention to the consequences of failing to meet these obligations. Ask for the agreement to distinguish an urgent, temporary situation from an ongoing breach and, where appropriate, provide for notice and a period in which to remedy the breach. A lawyer should check that these provisions are consistent with one another.

Practical takeaway: before choosing a brand, align three things: the time you can commit, the management arrangements permitted by the agreement and the full cost of replacing your own labour. Buy only when all three point to the same workable way of running the business.