Buying a franchise: who can sign on behalf of the franchisor?

A familiar name above the shopfront does not necessarily tell you who you are entering into a contract with. An intermediary may present the offer, a regional representative may handle negotiations, and a separate company may sign the agreement. Before joining a franchise network, check two things: which legal entity is taking on obligations towards you, and whether the signatory has authority to bind that particular entity. This is not a mere formality: it is essential to enforcing your contractual rights.

1. Distinguish the brand from your contractual partner

A brand is a commercial identity, whereas a contracting party is a specific individual or legal entity. A brand name at the top of a presentation is not enough to establish responsibility. The draft agreement should clearly identify the franchisor, including its full name, registered office and relevant identification details, such as a Croatian company’s OIB (personal identification number).

Compare these details with the offer, the invoice for the initial fee and the payment instructions. Different parties appearing on these documents do not automatically indicate a problem, but you should obtain an explanation before signing or paying.

Ask for clear answers to the following questions:

• Who is the franchisor under the agreement?
• Who receives the initial and ongoing fees?
• Who is obliged to provide the agreed training and operational support?
• To whom should you send notice if an obligation is not met?

If an international brand operates through a local franchisor, do not assume that the parent company guarantees its obligations. Belonging to the same corporate group does not, in itself, make every company in that group liable under the agreement. If it matters to you that another group company should also be liable, this needs to be expressly provided for in a legally effective arrangement.

2. Check authority to represent the company, not just the signatory’s job title

For a Croatian company, the starting point is the court register. Check the company’s current name and status, the people authorised to represent it, and the registered rules governing how they may do so. Pay particular attention to whether a person may act alone or must act jointly with another authorised person.

Titles such as ‘development director’, ‘regional manager’ or ‘franchise manager’ may describe a job, but do not in themselves prove authority to enter into an agreement. Likewise, a company email address and a business card are no substitute for checking that authority.

If someone is signing under a power of attorney, ask to see it and have its scope reviewed by a lawyer. You need to establish who granted it, whether that person had authority to do so, and whether it specifically covers entering into the franchise agreement. If the signatory holds a commercial power of attorney known as a prokura, check their registration and whether they may act alone or jointly, as well as whether any related transaction requires special authorisation.

For a foreign company, request an appropriate extract from the register in its country of incorporation. A lawyer should assess whether a translation, further evidence or special authentication of the document is needed. If negotiations have taken a long time, repeat the checks shortly before signing.

3. Establish the responsibilities of the local franchisor and any intermediary

Within a franchise network, an international franchisor may authorise a local partner to develop the network and enter into agreements with franchisees. In other cases, the local party merely finds prospective franchisees. These roles have different implications for your agreement.

If you are negotiating with an intermediary, ask for written confirmation of their role. Can they only pass on an offer, or can they agree binding terms? Do not leave an intermediary’s promise of additional support out of the agreement signed by the actual franchisor.

If the local partner is your franchisor, request evidence that it is entitled to grant franchises in Croatia and that its authorisation covers the intended duration of your relationship. You will not always need the entire confidential agreement between the international and local franchisors. You can ask for a relevant extract or direct written confirmation from the international franchisor, with a lawyer assessing whether this is sufficient.

In particular, clarify what happens if the local franchisor loses its authorisation. Will anyone continue to provide support, and on what terms? Do not rely on a verbal assurance that the international brand will ‘definitely take everything over’. Any such takeover of obligations must have an appropriate legal basis.

4. Consider Croatia’s legal framework

Croatia has no dedicated law comprehensively governing franchise agreements, nor a specific mandatory franchise disclosure document or franchise register that would replace these checks. A franchise agreement is an innominate contract — one not regulated as a distinct contract type — to which the general rules of the Croatian Obligations Act apply, including those on contract formation, representation and liability.

The Croatian Companies Act is relevant to the representation of Croatian companies. Depending on the business activities involved, other legislation also applies, including competition and intellectual property rules. The European Code of Ethics for Franchising is a self-regulatory standard for the franchise sector, not Croatian law or proof of a signatory’s authority.

If the signatory’s authority is unclear, do not assume that the agreement is automatically valid or invalid. The consequences depend on the circumstances, including any subsequent approval. It is safer to resolve the uncertainty before signing than to try to prove afterwards who was authorised to promise what.

Practical takeaway: before signing, obtain an up-to-date register extract, evidence of the signatory’s authority and clear confirmation of the franchisor’s identity. Have a lawyer cross-check these against the final agreement and payment instructions.