Adapting a franchise locally: what can a franchisee change?

A successful business in one Croatian city will not necessarily appeal to customers in another in exactly the same way. When turning an existing business into a franchise, it is therefore important to distinguish the recognisable core of the concept from elements that can be adapted locally. For a franchise network, this is not a choice between complete uniformity and complete freedom, but an agreement on how to adopt useful changes without losing the brand’s identity.

1. Define what you actually promise your customers

Before drawing up a list of permitted changes, describe your business’s core promise. Is it a particular way of preparing a product, speed of service, expert advice or a distinctive shopping experience? Any elements essential to delivering that promise should remain consistent across all outlets.

Then divide your offering into three categories:

• Mandatory core: products, services and processes that define the concept’s identity.
• Pre-approved options: alternatives that franchisees can choose from under specified conditions.
• Changes requiring approval: new products, additional services or different ways of delivering the offering that have not yet been tested.

For example, a service-based franchisor might retain a mandatory process for assessing customer needs while allowing different appointment packages. A foodservice concept might retain its core recipes while making a predefined allowance for a local seasonal product. These are examples of how to structure an offering, not universal rules for every sector.

For each element, record why it belongs in its category. “We have always done it this way” is not enough. If something must remain consistent, explain whether it protects quality, safety, brand recognition or the economics of the business.

2. Ask for evidence of local demand, not just impressions

Franchisees know their local market, but a claim that “customers here want something different” is only the start of the conversation. Introduce a short proposal form for local adaptations, asking for a description of the problem, the proposed change and the evidence supporting it.

Useful evidence might include repeated customer enquiries, reasons for abandoning a purchase, the sales mix of existing products or observations about peak demand times. Distinguish a genuine gap in the offering from a problem caused by insufficient product knowledge or poor service delivery.

Ask franchisees to answer a few questions:

• What specific customer need would the change address?
• Could the existing offering meet the same need if it were explained more clearly?
• What additional stock, skills or operational steps would the change require?
• Would it slow down the core service or make quality harder to maintain?

The franchisor should also assess costs that are not reflected in the sales margin alone: additional training, changes to IT systems, waste, more complex ordering and support time. A locally popular addition is not automatically good for the franchise network as a whole.

3. Introduce a limited trial of the change

Rather than granting permanent approval on the basis of a discussion, agree on a trial with a defined duration and scope. Its purpose is not to reassess the entire business model, but to establish whether one specific adaptation delivers a benefit without compromising shared standards.

Set out in writing which outlet will run the trial, what will change, the start and end dates, and who will make the final decision. Agree in advance who will pay the preparation costs and what will happen to unused stock if the change is rejected.

Success measures should cover more than revenue. Monitor contribution margin, delivery time, complaints, repeat purchases and the impact on sales of the core offering. If a new product merely takes sales away from an existing one, growth in its sales does not demonstrate an increase in the business’s overall value.

Avoid changing several important elements at once during the trial. Otherwise, it will be difficult to identify what influenced the results. Record any unusual circumstances too, such as a local event or exceptionally strong seasonal demand.

At the end, make one of four clear decisions: reject the change, test it further, approve it locally only or offer it to other franchisees. Local approval should not automatically turn into a new mandatory standard.

4. Align permissions with the agreement and applicable law

Croatia has no specific law comprehensively regulating franchising, nor a specific statutory format for pre-contractual franchise disclosure. Contractual relationships are governed by the Croatian Civil Obligations Act, including the principle of good faith and fair dealing. Depending on the change, the Competition Act, Trade Mark Act, Consumer Protection Act and sector-specific regulations may also be relevant.

The franchise agreement should therefore clearly link the right to make local adaptations to the approval process. Specify who submits a request, who decides, how the decision is recorded and when approval expires. Do not leave the meaning of the franchisor’s silence unclear: franchisees must know whether a lack of response means that the change is not yet permitted.

Franchisor approval does not replace compliance with legal requirements. A new offering may require additional consumer information, safety checks or compliance with specific operating requirements. Local adaptation of the offering also does not give the franchisor an unrestricted right to set franchisees’ selling prices.

Practical takeaway: before bringing franchisees on board, draw up a simple table of mandatory elements, permitted alternatives and changes requiring approval. Then make every departure from the standard subject to evidence of need, a limited trial and a written decision.