Quality control in franchising: preparing for oversight in Croatia

In your own outlet, you can often maintain quality through personal visits and quick discussions. Once a franchisee starts running the business, that approach is no longer enough. You need an agreed system of checks that protects customers and your brand’s reputation while respecting the franchisee’s independence as a business owner. To build a healthy franchise network, oversight should be predictable, supported by evidence and focused on solving problems rather than assigning blame.

1. Choose standards you can actually verify

Before offering a franchise, identify the procedures whose incorrect execution has the greatest impact on safety, the customer experience and brand consistency. Do not give every rule about an outlet’s appearance the same weight as a failure that could put a customer’s health at risk.

You can divide standards into three groups:

• Critical requirements: legal requirements and procedures relating to product or service safety.
• Core brand standards: the features of your offering and service delivery that make the concept recognisable to customers.
• Business improvements: recommended practices that improve efficiency but are not necessarily contractual obligations.

For each mandatory standard, specify what will be checked, what evidence is required and what criteria will be used. The phrase ‘a tidy outlet’ is too vague. It is more useful to state which surfaces must be clean, when they are checked and how completed cleaning is recorded.

Also check whether the franchisee can meet the standard with the equipment, staffing levels and support provided for in your business concept. A requirement that your own outlets regularly fail to meet is not ready to be applied across a franchise network.

2. Set out oversight rights and their limits in the agreement

Croatia has no dedicated law comprehensively governing franchising. The Civil Obligations Act is important for contractual obligations, while the Competition Act, the Trade Mark Act and sector-specific legislation also apply, depending on the issue. If checks involve personal data, the General Data Protection Regulation and Croatia’s Act on the Implementation of the General Data Protection Regulation apply.

The franchisor’s right to carry out internal checks should therefore be clearly defined in the agreement. Specify who may carry out a review, which premises and records they may access, how notice of a visit is given and when an unannounced visit is justified. Also establish who pays for routine reviews or follow-up checks after a failure has been identified.

An internal check by a franchisor is not an inspection by a public authority. The agreement does not grant an unrestricted right to enter premises, access documents or take over the management of an outlet. These powers must be clearly defined and lawful.

Ask a lawyer to check whether the consequences of non-compliance are proportionate and enforceable. The operations manual can describe the review process, but it should not independently create powers or financial obligations that have no basis in the agreement.

3. Prepare a review process that produces comparable results

Create a standard checklist for comparable types of outlet. Each item should include the standard, the checking method, the finding and space for supporting evidence. Allow items to be marked ‘not applicable’, with a mandatory explanation, so that different business formats are not scored unfairly.

Before reviewing your first franchisee, have two people independently assess the same company-owned outlet. If they rate the same procedure very differently, refine the criteria. This tests the reliability of your oversight process, not just the quality of the outlet.

During the review, distinguish observations from conclusions. ‘No equipment maintenance record was presented’ is a verifiable statement; ‘the franchisee does not look after the equipment’ is a personal judgement. Use photographs only where necessary, avoiding unnecessary images of customers, employees or their personal data.

At the end of the review, go through the findings with the franchisee. Give them an opportunity to explain the circumstances and provide additional information. Signing to acknowledge receipt of the report does not necessarily mean agreeing with every finding; make that distinction clear.

4. Assign corrective action to every instance of non-compliance

A report without a named person responsible and a deadline rarely changes behaviour. For each failure identified, record the action required, who will carry it out, the deadline and the evidence needed to confirm that it has been corrected.

For example, if an employee delivers a service incorrectly, repeating the training is not necessarily the only solution. The cause may be unclear instructions, unsuitable equipment or a work schedule that prevents the task from being performed properly. The corrective action plan should address the cause, not merely mask its effects temporarily.

Separate urgent risks from routine improvements. Prepare notification procedures and protective measures for urgent risks in advance, in line with the law and the powers granted by the agreement. Confirm completion of corrective action through evidence or a follow-up review, rather than relying solely on a verbal promise.

5. Use findings to improve the whole network

If the same problem occurs across several franchisees, examine your own system before concluding that they are all neglecting their obligations. Recurring problems may reveal poor instructions, inadequate support or an unrealistic standard.

Track repeated instances of non-compliance, the time taken to resolve them and the effectiveness of the support provided. Share results in a way that helps franchisees learn, without unnecessarily disclosing confidential information or publicly shaming anyone.

Practical takeaway: before signing your first franchise agreement, prepare a checklist, contractual oversight provisions and a corrective action plan template. Test them in your own outlet: effective oversight must clearly show both what is wrong and how to put it right.