Buying a franchise: do you have to run the outlet yourself?

Buying a franchise does not necessarily mean making an investment you can leave to a manager while you monitor the results. The franchisor may expect a particular person to be involved every day, remain available and personally oversee the outlet. Before joining a franchise network, check whether the business fits your available time and personal circumstances. What matters is not the title of ‘owner’, but the precise requirements for personal management and whether someone else can take over when needed.

1. Distinguish between the owner, the contracting party and the manager

First, establish who is actually bound by the requirement for personal involvement. You may enter into a franchise agreement as a sole trader or through a company. In the latter case, the agreement may still require a named shareholder, company director or approved manager to run the business.

These roles are not interchangeable. Owning a share in the company does not, in itself, determine who must be at the outlet each day. Equally, appointing a manager does not automatically mean you have met a contractual requirement to run the business personally.

Ask the franchisor to clarify the following:

• Who must personally run the outlet, and in what capacity?
• Does management mean being physically present, or taking responsibility for results and supervision?
• Is a particular level of availability or involvement in specific activities required?
• Can the same person manage more than one outlet or have other work commitments?
• Who can stand in for that person, and under what conditions?

Vague wording such as ‘actively participate in operations’ can lead to different expectations. Ask for it to be replaced with a description of specific activities, such as managing the team, checking standards and attending operational meetings. Also distinguish between binding obligations and recommendations from head office.

2. Check the legal basis and scope of the obligation

The Czech Republic has no dedicated franchise legislation. A franchise agreement is usually concluded as an agreement not specifically defined by statute under Section 1746(2) of Act No. 89/2012 Coll., the Civil Code. General contract rules apply, alongside other provisions depending on the nature of the relationship, such as licensing and competition rules.

There is also no specific requirement to register franchise agreements, nor a standard statutory disclosure document for prospective franchisees. General pre-contractual disclosure obligations still apply, however. The Czech legal framework therefore does not prescribe a set number of hours that every franchisee must spend at their outlet. The extent of personal involvement must be established from the individual agreement.

Also check whether the agreement merely requires your company to provide a particular manager, or includes a separate undertaking by a named individual. A lawyer should review who is accepting the obligation, how it can be enforced and the consequences of failing to fulfil it.

Do not rely on verbal assurances that no one checks whether the owner is present. If the agreement requires personal management, you need written provisions allowing you to operate through a manager. Trust within the franchise network is no substitute for a clear agreement on who does what.

3. Agree a predictable process for approving a replacement

The franchisor may have a legitimate interest in ensuring that the outlet is run by someone familiar with the franchise concept. However, you face a risk if they can reject any candidate without explanation or a deadline for responding. You could end up paying for repeated recruitment rounds without securing a suitable replacement.

Propose a process that sets out the experience and training required, the documents to be submitted and a deadline for a decision. If a candidate is rejected, ask for specific reasons. The agreement should distinguish between a permanent change of manager and short-term cover during holidays or illness.

Clarify the practical details too:

• Whether a replacement can be trained in advance.
• Who pays for their training and any repeat assessments.
• How to report an unexpected absence of the person responsible.
• What authority the replacement needs to deal with head office.
• Whether temporary cover is allowed while the approval process is being completed.

The franchisor’s approval of a manager does not, in itself, transfer your contractual obligations to head office. You still need to define your relationship with the manager and the scope of their authority clearly. Approval for someone to stand in also does not replace any qualifications, licences or other authorisations legally required for the activity concerned.

4. Test the arrangements for illness, a manager’s departure and the true costs

Before signing, work through three scenarios: a planned holiday, a prolonged period of sick leave and the manager’s sudden departure. For each, ask who can take over, what you must report and how long an interim arrangement can last.

Illness or another personal difficulty does not automatically release you from a contractual obligation. Propose a reasonable period for finding a replacement and a process for remedying the situation before the franchise relationship can be terminated. There should be an agreed solution for a named person’s long-term inability to run the business, rather than leaving it entirely to head office’s goodwill at the time.

Finally, reassess the financial projections against the actual management model. If the figures assume you will work every day without appropriate pay, you cannot expect the same result with a paid manager. Include the cost of their remuneration, cover, training and the time needed to hand over the operation.

Practical takeaway: Before buying, get written confirmation of who must run the franchise, how someone else can stand in and who approves the replacement. The agreement needs to work even when you are not available every day.