Software in franchising: check your rights before expanding

Tills, bookings, ordering and staff rotas often depend on applications that business owners take for granted. But turning an existing business into a franchise changes the question: it is no longer enough for the software to work for you; another business owner must be able to use it lawfully and reliably. Before bringing partners into your franchise network, check whether your existing contracts allow this way of working.

1. List your tools and establish who is allowed to use what

Start with a typical working day at an outlet. Record every digital tool staff need to take an order, charge for a service, check stock or close for the day. Include less obvious dependencies too: online shop plug-ins, messaging services, report templates and integrations between applications.

For each tool, create a record covering:

• the supplier’s name and the licensed customer;
• the charging model, for example per user, location or level of usage;
• the permitted number of users and business entities;
• whether use by a separate legal entity is allowed;
• the rules for setting up accounts, obtaining support and ending use;
• options for exporting data and integrating with other tools.

Do not assume that a franchisee is covered by your licence. A franchisee is an independent business owner, and permission for your employees or company-owned outlets to use the software may not extend to the franchisee’s company. Equally, being technically able to create an additional account does not prove that such use is covered by the contract.

Flag any bespoke software in particular. A paid development invoice does not, on its own, establish that you may copy, modify or allow other businesses to use the software.

2. Check licences against Croatia’s legal framework

Croatia has no specific franchise law or prescribed statutory format for pre-contractual franchise disclosure. A franchise agreement is an innominate contract — one not specifically defined in legislation — and contractual relationships are governed by the Croatian Obligations Act. Freedom of contract does not allow you to grant a partner rights you do not hold yourself.

The Croatian Copyright and Related Rights Act is relevant to computer programs. The scope of permitted use should be checked against both that Act and the specific contract with the rights holder. A franchise agreement cannot replace any necessary permission from the software supplier.

Explain your actual plans to the supplier: independent franchisees, multiple locations, shared standards and any central access required by the franchisor. Request written confirmation of a suitable licensing model or an amendment to the contract. A marketing claim of ‘unlimited users’ is not enough if it applies only to employees of a single company.

If you require franchisees to use a particular tool or supplier, competition rules may also be relevant, including the Croatian Competition Act and applicable EU rules. Explain the business need for a shared system, but do not assume that every restriction is permissible simply because it appears in the contract.

Where the system processes personal data, obligations under the General Data Protection Regulation must be addressed separately. A software licence alone does not resolve them.

3. Choose a clear contracting and payment model

In practice, there are three organisational models to consider, depending on the supplier’s offering and the needs of the business.

The franchisee contracts directly with the supplier. The franchisor specifies the required functionality, while the franchisee pays for their own subscription. Check in advance whether the franchisor can obtain the agreed access to reports and how settings will be kept consistent across outlets.

The franchisor contracts for a shared service. This model only makes sense if the supplier’s contract allows independent franchisees to be included. Clearly establish who creates accounts, who pays for additional users and what happens if an outlet fails to pay its share of the cost.

The franchisor provides its own software. Before making this commitment, check the rights relating to the code, documentation, embedded components and maintenance. Having access to source code is not the same as having the right to make further use of it.

For your chosen model, prepare a breakdown of the total costs: initial setup, subscription, equipment, integration, training and data export. Make clear to prospective franchisees which costs are mandatory and which relate to optional extras. If you receive a commission or discount linked to a franchisee’s purchase, explain that arrangement transparently.

4. Test a separate account and plan for exit

Before making the software a mandatory standard, test it using an account with exactly the permissions a future franchisee will have. Do not test it solely through the business owner’s administrator account.

Check whether the franchisee can carry out daily tasks independently, obtain support and continue working if the connection is lost. Establish who they should report problems to: the franchisor, the software supplier or the equipment maintenance provider. For each scenario, designate a responsible person and an escalation procedure.

Also agree how use of the software will end. Record who exports the data, in what format, at what cost and when access is withdrawn. Franchisees need to be able to meet their statutory record-retention obligations without retaining unnecessary access to the shared system. Check whether the software subscription terms align with the planned franchise relationship.

Practical takeaway: before expanding, make sure every essential tool has documented permission for its intended use, a known cost and a tested process for adding and removing franchisees. That way, the digital foundations of your franchise network will not rest on assumptions.