Buying a franchise: what information to request before signing

An appealing presentation and a draft agreement are not enough when joining a franchise network. You also need information that allows you to assess what you are actually buying and the risks you are taking on. In the Czech Republic, however, there is no mandatory standard pre-contractual disclosure document for franchises. This makes it all the more important to prepare your own list of questions, record the answers and distinguish documented facts from expectations.

What franchisors must disclose under Czech law

The Czech Republic has no specific franchising legislation or mandatory register of franchise offers. Franchise agreements are generally concluded as contracts not specifically defined by law under Section 1746(2) of Act No. 89/2012 Coll., the Civil Code. Depending on the agreement’s content, general rules governing matters such as licensing, sales or leases also apply. Czech and EU competition rules are relevant too.

The absence of specific legislation does not mean that the other party can withhold everything you do not expressly ask about during negotiations. Section 1728(2) of the Civil Code sets out a general pre-contractual duty to provide information. The parties should disclose factual and legal circumstances of which they are aware, or must be aware, so that each can establish whether a valid contract can be concluded and understand the other party’s interest in entering into it.

This does not, however, give you an unlimited right to obtain all of the franchisor’s internal documents. The scope of the duty depends on the particular circumstances. Nor does Czech law prescribe a specific period before signing within which a franchise information pack must be supplied. You should therefore expressly agree on sufficient time to review it.

The European Code of Ethics for Franchising is a self-regulatory code for the franchise sector, not Czech law. If a brand refers to it, check what commitment it is actually making and whether that commitment applies to your relationship.

Put together your own information pack

A request to “send all the important information” usually results in marketing materials. A better approach is to draw up a list of specific items and ask the franchisor to provide an answer, the relevant document and the date as at which the information is valid. Focus particularly on the following areas:

• Who is making the offer: the exact company that will be party to the agreement, its identifying details and its relationship with the owner of the franchise concept. Distinguish the brand’s history from that of the company you will be dealing with.
• How the network is structured: which outlets are company-owned and which are franchised, how long they have been operating and whether the format being offered is actually in use in the Czech market.
• What changes are under way: planned changes to the concept, organisational arrangements or scope of services that could materially affect the proposed relationship.
• What obligations you are taking on: the complete set of documents to be signed and an overview of any further agreements you will need to enter into with the franchisor or third parties.
• What could prevent the franchisor from meeting its obligations: known disputes or restrictions that could affect its ability to provide the promised rights and services.

For each item, ask whether it describes the current position, an approved change or merely a plan. An intention to establish a Czech support team is not the same as having a team already in place. Likewise, a successful overseas format does not automatically demonstrate experience of operating it locally.

Distinguish answers, evidence and estimates

Create a simple table with columns for the question, answer, supporting evidence, date and outstanding issue. After a meeting, summarise any verbal explanations by email and ask for confirmation or corrections. The aim is not to overwhelm the other party with paperwork, but to prevent the people involved from interpreting the offer differently.

Check the company’s basic details against the Czech public register and the documents available in its Collection of Deeds. Public records, however, do not certify the quality of a franchise or guarantee that obligations will be met in future. If a document is missing, ask about it first; its absence alone does not explain why it is missing.

Always connect an important answer to what it means for your decision. For example, if the offer relies on a service that is still being developed, record whether you can open without it and who will arrange an alternative. For estimates, ask for the underlying assumptions and an explicit statement of uncertainties, rather than just the final figure.

Also agree that key information will be kept up to date until signing. Documents may be accurate when supplied but become outdated during lengthy negotiations.

What to do if information is not provided

A refusal does not automatically indicate a problem. The franchisor may be protecting trade secrets or other franchisees’ personal data. Suggest a proportionate alternative: an anonymised summary, inspection under controlled conditions or disclosure to your legal adviser subject to confidentiality.

Refusing to disclose a detailed internal procedure is not the same as refusing to identify the contracting party or explain a known obstacle to granting a licence. Where significant uncertainties remain, assess not just the willingness to answer, but above all the effect of the missing information on your decision.

Before signing, divide outstanding questions into acceptable uncertainties, matters requiring a contractual solution and issues that prevent you from proceeding. Your lawyer should receive the list of unanswered questions as well as the agreement itself. Not every incorrect or incomplete statement automatically gives you the right to cancel the agreement; the legal consequences depend on the circumstances.

Practical takeaway: Do not treat the information pack as a formality. Before signing, make sure that every key question has a documented answer, an uncertainty you have expressly accepted or a clear reason to postpone signing.