Franchise or licence: what to offer partners in Croatia

A successful product and a recognisable name can attract entrepreneurs who want to trade under your brand. But permission to use a name is not the same as passing on a complete way of running a business. Before developing a franchise network, decide what you can genuinely pass on to a partner and which commitments you can fulfil over the long term. That decision will shape your offer, your contract and your day-to-day working relationship.

1. Distinguish between a right to use something and a business system

A licence grants a partner a specific right, such as the use of a trade mark or a technological process, within agreed limits. This relationship may include quality standards, monitoring and technical assistance. The presence of these obligations alone does not mean you have created a franchise offering.

With a business format franchise, you provide a broader package: a recognisable identity, a proven operating model, know-how, standards and support in applying them. The franchisee remains an independent entrepreneur, trading in their own name and for their own account. Joining a franchise network does not remove their business risk.

For example, allowing another manufacturer to use your trade mark on a particular product may constitute a licensing relationship. If a partner opens an outlet based on your concept, follows your customer service and working procedures, and receives ongoing support, the offering is closer to a business format franchise. The final legal assessment depends on the substance of the relationship, not simply the title of the document.

The first question is not what to call the fee, but what the partner receives beyond the right to use your name.

2. List what you are actually providing

Before preparing your offer, draw up an internal table with four columns: what you are providing, evidence that you have it, how it will be made available to the partner, and who is responsible for maintaining it. The aim is not to write an operations manual, but to establish whether you have a complete offering.

Include the following in the table:

• Identity: which names, marks and visual materials the partner may use, and whether you have the right to authorise that use.
• Know-how: the specific procedures you will pass on, rather than a general promise to share your experience.
• Business organisation: which elements of the concept are common to all partners, and which the partner must develop independently.
• Tools and materials: which templates, software and other resources you will provide, and whether you are entitled to make them available to third parties.
• Ongoing commitments: what you will regularly provide after the initial transfer of know-how.

For each item, look for evidence that already exists. This might be a documented procedure, a contractual right of use or a named person capable of fulfilling the commitment. A plan for future development is not the same as a resource that is ready to use.

Pay particular attention to materials supplied by external contractors. Paying for designs, photographs or software does not automatically mean you can let partners use them. Check the scope of your rights in the relevant contracts before including these materials in your offer.

3. Croatia’s legal framework looks at the substance of the relationship

Croatia has no dedicated law comprehensively regulating franchising, nor a specific statutory regime requiring a pre-contractual franchise disclosure document. This does not mean the relationship falls outside the law or that a contract can disregard mandatory legal requirements.

Contractual relationships are governed by Croatia’s Civil Obligations Act (Zakon o obveznim odnosima), including the principles of good faith and fair dealing, and rules on fulfilling obligations and liability. The Trade Mark Act (Zakon o žigu) is relevant to the use of protected marks. The Companies Act (Zakon o trgovačkim društvima) is important for matters including companies, business names and representation.

Any restrictions agreed with a partner should be reviewed under the Competition Act (Zakon o zaštiti tržišnog natjecanja) and applicable European Union rules. Calling an arrangement a ‘licence’ does not exempt agreements on prices, sales territories or other restrictions from that review. Depending on the activity, the Trade Act (Zakon o trgovini) and specific requirements for carrying out particular business activities also apply.

Give your lawyer a description of how the relationship will actually work, rather than just your chosen contract title. Explain who provides what, what they monitor, what they charge for and what they are responsible for. Only then does it make sense to draw up the legal documentation.

4. Match your promises to what you can deliver

The greatest practical risk arises when an offering is presented as a complete system, but the partner actually receives only a brand and a few initial instructions. Conversely, a limited licensing offer can become unsustainable if you informally promise day-to-day business support that you have not planned for.

Before speaking to prospective partners, write a one-page document entitled ‘What we provide — and what we do not’. Separate the initial handover from ongoing commitments. Also list the tasks the partner must organise independently. Then compare this document with your sales presentation and draft contract: all three should describe the same working relationship.

If you do not yet have a complete system, do not present a licence as a shortcut to franchising. You can develop the missing elements or offer a narrower, clearly defined relationship if it suits your business objective.

Practical takeaway: before expanding, list the rights, know-how and commitments you can genuinely provide. Build a franchise network only when your promise to partners matches the system you can consistently deliver.