Buying a franchise: how to agree an opening deadline

The planned opening date is more than just an entry in your business plan. If the franchise agreement links it to the start of fee payments, the contract term or a right to terminate, a delay can significantly alter the financial case for buying the franchise. Before joining a franchise network, distinguish between your target date and a binding deadline, and agree what happens if the premises, equipment or franchisor’s approval are not ready.

1. Define exactly what counts as opening

The phrase “start of trading” could mean the first trial run, the first sale to a customer, the official opening or the day the franchisor confirms that its standards have been met. If the agreement uses these terms interchangeably, you could find that fees are already accruing even though the outlet cannot yet trade normally.

Ask for a single, clear definition of the opening date, with separate provisions for trial operations. In particular, check whether you may generate sales during the trial period, which fees apply and who authorises the move to normal trading.

Draw up a list of prerequisites suited to the specific business:

• completed building work and the utility connections needed to operate;
• essential equipment delivered, installed and tested;
• staff in place and mandatory initial training completed;
• opening stock available and a functioning payment system;
• legal requirements for operating the business met;
• written confirmation from the franchisor that the agreed standards have been met.

The franchisor’s approval is no substitute for permits or other legal requirements. Equally, meeting legal requirements does not automatically mean that all the agreed brand standards have been met.

2. Draw up a schedule of obligations, not just a final deadline

An obligation on the franchisee to “open the outlet by a specified date” is not balanced if the franchisor has no deadline for supplying plans, checking equipment or carrying out the final inspection. The final date should be linked to the preceding steps required of both parties.

For each step, record the person responsible, the deadline, the documentation required and how completion will be confirmed. If the franchisor approves the premises layout, specify when its response period begins: for example, on receipt of a complete application. Also agree how it must notify you of anything missing, so that the application cannot remain “under review” indefinitely.

Ask for the final inspection criteria to be set out in advance. It is useful to distinguish between defects that prevent safe or lawful operation and minor deviations that can be put right after opening. The option to open in those circumstances should be expressly agreed, not assumed.

Do not rely on a verbal promise that the deadline can easily be moved. The agreement should specify who may authorise a change of date and how that change must be confirmed. Then update the shared schedule so that different teams are not working towards different dates.

3. Distinguish between the causes of delay and their financial consequences

Not all delays are alike. The franchisee may be late placing an order, the franchisor may be late approving the plans, or a supplier may be late delivering. Delays may also arise from circumstances beyond either party’s control. Agree in advance on the notification procedure, evidence required and consequences for each situation.

It is useful for the agreement to address:

• when the deadline will be extended and how the extension is calculated;
• what steps each party must take to minimise delays;
• whether minimum or fixed fees become payable before opening;
• whether the start of the contract term moves accordingly;
• who bears reasonable additional costs for a repeat inspection or team visit;
• what happens if the outlet still has not opened by a further agreed final deadline.

For example, if a multi-year agreement runs from the date of signing, an opening delay reduces the time available to earn revenue under the brand. Negotiate whether the franchise term begins on signing or on opening, and clearly distinguish the obligations that apply during the preparation stage.

Do not assume that every supplier delay amounts to force majeure. The legal assessment depends on the circumstances and the agreement. If the franchisor selected the supplier or required you to use it, make specific provision for alternative supplies and the consequences of delay; that fact alone does not automatically settle liability.

4. Check the Croatian legal framework before signing

Croatia has no specific law comprehensively regulating franchising, nor a specific statutory requirement to provide a standardised pre-contractual franchise disclosure document. The Croatian Civil Obligations Act is relevant to contractual obligations, delays, liability for damages and termination. Depending on the business, the Trade Act, the Competition Act and sector-specific regulations may also apply.

This means that the opening deadline and any extensions should not be left to assumed “franchising rules”. The European Code of Ethics for Franchising is a self-regulatory standard for the franchise community; it is not Croatian law and does not, in itself, replace contractual provisions.

A lawyer should check that the consequences of delay are consistent with the rest of the agreement, particularly the provisions on fees, duration and termination. An accountant can calculate the cost of the business while it is not yet generating revenue.

Practical takeaway: before signing, ask for the opening schedule to be attached to the agreement as a contractual annex. Every key step should have a responsible party, a deadline and an agreed consequence of delay.