Changes to Franchise Agreements in Croatia: Set the Rules in Advance

When turning an existing business into a franchise network, it is easy to draft the agreement around how things work today. But equipment becomes outdated, digital tools change and customers expect new services. Before the first agreement is signed, you therefore need to establish how changes will be introduced, who approves them and who bears the cost. A well-defined change process protects both business development and the franchisee’s investment.

1. Distinguish between an operational instruction and a contract amendment

Not all changes are alike. Replacing a daily reporting form may be an operational update. Requiring franchisees to buy a new IT system, refurbish their premises or accept a new financial obligation may materially alter their contractual position.

Before drafting the agreement, list the changes you expect and divide them into three categories:

• Routine changes: adjustments to forms, reporting schedules or working instructions that do not require significant additional investment.
• Changes with a financial impact: new equipment, subscriptions, building works or an increase in the required number of staff hours.
• Changes to core rights and obligations: changes to the agreed scope of the business, the contract term or the method of calculating fees.

Set out a procedure for each category. Routine changes may be introduced by notice if the agreement clearly grants that authority. For more significant changes, provide additional safeguards and, where they fall outside the authority granted by the agreement, require a mutually agreed contract amendment.

Do not assume that a clause stating ‘the franchisee must comply with all future instructions’ covers every situation. The operations manual is not a reliable shortcut for changing core contractual obligations.

2. Set limits in line with Croatian law

Croatia has no dedicated law comprehensively governing franchise agreements. Nor is there a general requirement to register a franchise in a dedicated state franchise register or to provide a specific statutory pre-contractual disclosure document for every franchise. This does not mean that the parties are exempt from general legal rules.

The Civil Obligations Act is central to the agreement and any amendments, including its rules on contract formation, good faith and fair dealing, and standard terms and conditions. Freedom of contract is not unlimited: provisions must comply with mandatory rules and other legal restrictions.

Depending on the nature of the change, the Competition Act, applicable European Union competition rules, the Trade Mark Act and sector-specific regulations may also be relevant. Introducing a shared customer database also requires a review of obligations under the General Data Protection Regulation and Croatia’s Act on the Implementation of the General Data Protection Regulation.

The European Code of Ethics for Franchising is not Croatian law. It may be relevant as a standard within the franchising community, or through membership commitments or contractual acceptance, but it does not replace legal rules.

Give your lawyer concrete scenarios for potential changes, rather than simply asking for an agreement that allows ‘flexibility’.

3. Agree on notice, costs and a transition period

For changes that the franchisor may introduce within its contractual authority, define at least the following in advance:

1. Reason for the change: for example, legal compliance, safety or technological obsolescence.
2. Scope of authority: what the franchisor may change and what requires a separate agreement.
3. Method of notification: an agreed address or delivery system that provides proof of receipt.
4. Implementation timeframe: time for procurement, adaptation and organising work.
5. Allocation of costs: who pays for equipment, installation, subscriptions and data migration.
6. Objection procedure: whom the franchisee should contact and how genuine difficulties will be considered.

There is no single statutory notice period that applies to every franchise change. The agreed period should reflect the complexity of the change, while respecting any mandatory deadlines under applicable regulations.

For major investments, consider a contractual cost cap, a phased rollout or specific approval above an agreed threshold. Take the remaining contract term into account: the same cost will affect a franchisee who is just starting out differently from one whose agreement is about to expire.

Provide a separate procedure for urgent safety-related or legally required changes, but do not use urgency as a blanket justification for commercial decisions.

4. Follow a documented process for every change

Suppose you want to introduce a new ordering system. Before issuing a mandatory instruction, check whether the existing agreement permits the change and covers the additional monthly subscription. Then prepare an overview of the costs, technical requirements, operational impact and potential business disruption.

Provide franchisees with the reasons for the change and an implementation schedule. If a contract amendment is required, do not treat silence as automatic consent. Record consent in a legally appropriate way that can be evidenced.

Keep a record for each change covering the decision date, legal basis, affected outlets, notices sent, required consents and effective date. Archive previous versions of documents so that you can establish which obligation applied at any given time.

Practical takeaway: before entering into your first franchise agreement, draw up a simple change matrix: what is changing, who decides, who pays and which document authorises it. This will ensure that the development of the franchise network does not depend on unclear instructions or pressure placed on franchisees after the event.