Pre-contractual Franchise Information in Croatia

Before bringing your first franchisee into an existing business, prepare the information they need to make an informed business decision. A sales presentation is not enough: you need to distinguish clearly between proven results, estimates and the future partner’s obligations. This preparation builds trust within the franchise community and reduces the risk of differing expectations turning into a dispute.

What Croatian law requires before signing

Croatia has no dedicated franchise law or legally prescribed standard franchise disclosure document. Nor is there a specific statutory franchise disclosure period within which such a document must be given to a prospective franchisee before signing. However, this does not mean that a franchisor may withhold important information or promise results without a sound basis.

The Croatian Obligations Act applies to negotiations and the contractual relationship, including the principle of good faith and fair dealing and the rules on liability for negotiating contrary to that principle. Negotiations do not in themselves create an obligation to enter into a contract, but conduct during negotiations may give rise to liability for damages. Inaccurate representations and the deliberate withholding of material facts may have legal consequences, depending on the circumstances.

The Croatian Competition Act and applicable European Union rules on vertical agreements are also relevant to the terms of the future relationship. Rights to names and branding should be checked under the Croatian Trade Marks Act, while the General Data Protection Regulation and Croatia’s implementing legislation apply when processing prospective franchisees’ personal data.

Franchise industry codes of ethics can provide useful standards of transparency, but they are no substitute for the law. If you have committed to a particular code, check its requirements for informing prospective franchisees as well.

Prepare a separate information pack

The pre-contractual information pack should help prospective franchisees understand what they are buying and the obligations they are taking on. You do not need to hand over every confidential operating procedure at the outset. You do need to disclose enough for them to assess the offer, while taking reasonable steps to protect trade secrets.

Include the following in the pack:

• The franchisor’s identity: full legal name, registered office, identification details and the role of any associated companies providing key services.
• The concept’s track record: how long it has been operating, what has been tested in company-owned outlets and whether there is any experience with independent franchisees.
• The rights you are offering: who owns the trade mark and the basis on which you are entitled to authorise its use.
• Total initial investment: the initial franchise fee, equipment, fit-out, stock, deposits and required working capital, with clear assumptions underpinning the estimates.
• Ongoing obligations: fees, mandatory purchasing requirements, technology costs, required insurance and anticipated future investment.
• The limits of support: what the franchisor actually provides, what attracts an additional charge and what remains the franchisee’s responsibility.
• Key contractual terms: duration, renewal, territorial rights, transfer of the business and the consequences of the agreement ending.

Attach the draft agreement and relevant schedules. If a particular cost is not yet known, identify it as an outstanding issue and explain how it will be determined. A blank field must not look like confirmation that there is no cost.

Present results as evidence, not guarantees

The success of a company-owned outlet is not a promise of success at a new location. For every financial presentation, explain the data source, the period covered, the type of location and any particular operating circumstances.

If you present turnover figures, state whether they include VAT. If you present profit or operating results, explain which costs are included. In particular, make clear whether the figures account for the owner’s labour, franchise fees, market-rate rent and support costs that a company-owned outlet may not pay separately.

Historical results, projections and targets must be clearly distinguished. Prepare projections using several scenarios, with assumptions about customer numbers, average spend, staffing and costs. Do not present only the best-performing outlet as representative of the concept as a whole.

For example, if an existing outlet occupies premises owned by the founder, its results are not directly comparable with those of an outlet paying market rent. Show prospective franchisees this difference explicitly rather than leaving it in a footnote.

Avoid phrases such as ‘a sure return’ or ‘guaranteed earnings’. A disclaimer stating that results are not guaranteed does not remedy an inaccurate or selective presentation.

Manage delivery, questions and updates

Appoint someone to take responsibility for the accuracy of the pack. Each version should be dated and labelled, and its delivery to the prospective franchisee should be recorded. An acknowledgement of receipt proves that the documents were provided; it is not a waiver of the recipient’s rights or confirmation that they understood every detail.

Allow reasonable time for review and independent legal and accounting advice. Present this as your own process for providing proper information, not as a statutory Croatian franchise disclosure period. Provide the pack before the prospective franchisee takes on significant financial commitments connected with the offer.

Keep a record of questions and written answers. If you change fees, the supplier of key equipment or the scope of support during negotiations, provide an update and explain the impact of the change. Ensure that sales presentations and statements are consistent with the documentation, so that verbal promises do not contradict the agreement.

Practical takeaway: before the first substantive discussion, prepare a dated information pack, verifiable financial presentations and a process for answering questions in writing. Prospective franchisees should be able to see clearly what has been proven, what is an estimate and what risks they are taking on.