Customer complaints in a franchise: agree responsibilities in advance

Customers see a shared brand name, but often buy the product or service from an independent franchisee. Before expanding an existing business, it is therefore important to clarify who receives complaints, who decides on refunds and who bears the cost of resolving an issue. Within a franchise network, a shared reputation does not mean that all participants are the same legal entity. A clear division of responsibilities protects customers and reduces misunderstandings between partners.

1. Establish who contracts with the customer

Start with how sales actually work, rather than assuming that the business whose name appears above the entrance is responsible for everything. For each sales channel, record who makes the offer, enters into the contract, issues the receipt or invoice, receives payment and supplies the product or service.

At a physical outlet, this may be the franchisee. For a shared online shop, responsibilities may be divided differently: the franchisor may sell directly, act as an intermediary or simply provide the technical infrastructure. These differences must be clear in the documentation and information customers receive before buying.

Create a simple table covering in-store sales, online orders, delivery and collection at another location. For each channel, identify the responsible trader and the contact for complaints. In particular, check that the details on receipts or invoices, order confirmations and at the point of sale reflect the actual contractual relationship.

A shared brand name must not obscure the trader’s identity. Customers do not need to be burdened with the franchise network’s internal structure, but they must know who they are dealing with and whom they can contact.

2. Separate legal obligations from internal arrangements

Croatia has no dedicated law comprehensively governing franchising. Franchise agreements are based primarily on the Croatian Civil Obligations Act. For consumer relationships, the Consumer Protection Act and the Civil Obligations Act’s rules on liability for defects are particularly important. Additional regulations apply depending on the sector.

Traders must allow consumers to submit written complaints at their business premises, by post and by email. They must acknowledge receipt in writing without delay and provide a written response within 15 days, clearly stating whether they accept that the complaint is justified. Records of written complaints must be retained for one year from receipt.

Internal procedures between franchisor and franchisee do not extend that deadline. If a franchisee has to wait for head office approval, the agreed procedure must still allow a timely response to the customer.

Also distinguish between a customer’s statutory rights and a voluntary benefit. Returning a non-faulty product bought in-store because the customer has changed their mind is not the same as exercising rights relating to a defect. Distance contracts are subject to specific rules on the right to withdraw, with statutory exceptions.

A franchise agreement can allocate internal costs and tasks, but it cannot remove mandatory consumer rights. A lawyer should therefore check that the agreement, sales policies and actual practices comply with the law.

3. Agree decision-making powers, costs and escalation procedures

Before signing the first franchise agreement, decide which decisions the franchisee can make independently. If permission is needed for every product replacement, resolving a simple problem can become unnecessarily slow. Conversely, unrestricted promises made at the franchisor’s expense create unpredictable costs.

Use the agreement and its associated procedure to set out:

• Receipt of complaints: who monitors each channel and records the date a complaint is received.
• Decision-making: which requests the franchisee handles independently and when the franchisor must be involved.
• Costs: who pays for refunds, replacements, delivery and goodwill compensation to customers.
• Co-operation: what evidence partners exchange and how quickly they respond to one another.
• Urgent cases: who must be notified immediately of potential safety issues or recurring defects.

Link the allocation of costs to the cause of the problem and the agreed obligations. A mistake in local operations, a defect in materials supplied across the network and a problem with a supplier’s product are not necessarily equivalent situations. Avoid automatically passing every cost on to the franchisee without establishing the facts.

Make specific arrangements for customers who want to return a product bought from one franchisee to another. If you offer this benefit, agree in advance how purchases will be verified, how partners will settle costs between them and how stock will be handled. Only promise customers what the whole network can deliver.

4. Test the procedure before bringing partners on board

Run a short simulation at an existing outlet: a complaint arrives at a shared email address, the receipt was issued by a local company, and the person who approves refunds is unavailable. Check whether an employee can identify the responsible person, log the case and arrange a response without the owner’s help.

Prepare a complaint log template covering the date of receipt, a description of the request, the person responsible, the deadline and the outcome. Restrict access to personal data to those who need it to resolve the case.

Then review your public promises about returns, replacements and customer satisfaction. They must reflect the agreed decision-making powers and available resources, not just the image you want the brand to project.

Practical takeaway: before expanding, create a single table of responsibilities by sales channel and one tested complaints-handling procedure. The agreement should then clearly support that procedure without limiting customers’ rights.