Quality control in franchising: rules for franchisors in Croatia

When you open up an existing business to franchisees, your reputation no longer rests solely on your own work. Customers expect the same reliability at every location, regardless of who runs it. Before expanding, you therefore need to design a quality control system that clearly distinguishes mandatory standards from recommendations. In a healthy franchise network, checks are not about finding someone to blame, but about identifying problems early and resolving them responsibly.

1. Define what you will check and on what legal basis

Croatia has no dedicated law comprehensively governing franchising. A franchise agreement is an innominate contract, meaning it is not a specifically regulated type of contract, and is subject to the general rules of Croatia’s Civil Obligations Act. Nor is there a general mandatory state register of franchises or a specific statutory format for pre-contractual franchise disclosure. This does not remove the obligation to act in good faith and deal fairly during negotiations and the performance of the agreement.

The franchisor’s right to carry out checks should therefore be clearly set out in the agreement. Owning the brand does not, in itself, give you unlimited access to another business’s premises, records or personal data. The agreement should specify:

• what will be checked, such as the appearance of the premises, service delivery and complaints handling;
• the method and frequency of routine checks;
• the circumstances in which an exceptional or unannounced visit may take place;
• the evidence that may be collected and who may carry out the checks;
• the process for the franchisee to respond and remedy shortcomings;
• how costs will be allocated, including any follow-up inspection.

Alongside the Civil Obligations Act, relevant legislation includes Croatia’s Competition Act, Consumer Protection Act and sector-specific regulations. If checks involve personal data, the General Data Protection Regulation and Croatia’s Act on the Implementation of the General Data Protection Regulation apply. Contractual permission to carry out checks does not replace the need for a lawful basis for processing that data.

2. Turn expectations into verifiable criteria

Phrases such as “excellent service” or “well-kept premises” are not enough for a fair assessment. Each criterion should describe conduct or an outcome that two different people can assess in a comparable way.

For example, rather than requiring an employee to “know the offering well”, check whether they can explain what the service includes, its price and the terms of the order. Instead of giving a general cleanliness rating, specify the surfaces to be inspected and how cleaning and maintenance should be recorded. When checking mandatory consumer information, assess its availability and accuracy, not just whether its presentation matches the brand.

Classify findings by severity:

• Critical: an immediate safety risk, a serious breach of customers’ rights or another situation requiring urgent action.
• Major: shortcomings that materially undermine the agreed service or recur.
• Minor: isolated shortcomings with no immediate serious impact.

Do not allow a high overall score to mask a critical finding. A location may have tidy signage and friendly staff while also having a serious safety problem.

Before applying the criteria to franchisees, test them in your own business. If your own location regularly fails to meet a standard, establish whether the problem lies in implementation, resources or an unrealistic requirement. Do not turn the founder’s personal habits into obligations that offer no clear benefit to customers.

3. Organise checks without unnecessary intrusion

Routine checks should have a clearly defined scope, a designated person responsible and a predictable process. Advance notice helps ensure that the manager is present and records are available. Unannounced checks may be justified, but their contractual framework and the way they are carried out should be proportionate to their purpose, particularly where they disrupt operations or involve access to restricted areas.

The person carrying out the check should record facts, not impressions. “Information on how to submit a written complaint was not available in the places inspected” is a more useful finding than “the location treats customers poorly”. Photographs should show the specific shortcoming, avoiding unnecessary images of customers, employees or documents containing personal data.

For each item of evidence, define who may access it, where it will be stored and for how long. If you intend to use mystery shoppers or make recordings, first assess separately whether the method is lawful, what information you must provide to those affected and which data protection rules apply. Using a mystery shopper does not automatically make covert recording permissible.

Quality control must not become a means of covertly imposing fixed or minimum resale prices. Franchisees are independent businesses, and restrictions on their operations must comply with competition rules.

4. Follow up every finding with an agreed corrective action

After the inspection, provide a report setting out the criterion, the evidence, the severity of the shortcoming and a proposed deadline for putting it right. Give the franchisee an opportunity to correct factual inaccuracies, provide further evidence or explain the circumstances. Clearly distinguish disagreement with a finding from refusal to remedy a confirmed problem.

The corrective action plan should answer four questions: what will change, who is responsible, by when, and how completion will be verified. For critical findings, provide for urgent protective measures proportionate to the risk and within your contractual powers. For other findings, set a realistic deadline and identify the support the franchisor needs to provide.

If the same shortcoming appears at several locations, review your own guidance, equipment and support arrangements. Recurrence may point to a shared problem rather than a lack of responsibility on the part of an individual franchisee. Share a summary of the lessons learnt within the franchise network without unnecessarily revealing identities or confidential information.

Practical takeaway: before signing your first franchise agreement, prepare contractual rules for quality checks, a checklist of verifiable criteria and a corrective action plan template. Clear criteria and consistent support protect quality more effectively than an unlimited right to inspect.