Buying a franchise: who is liable for defective equipment?

A coffee machine, refrigeration unit or production machine can be just as important to a franchise as the right to use the brand. Yet buyers sometimes devote only a short contractual appendix to equipment supply. Shared standards help maintain quality across a franchise network, but they do not guarantee fault-free equipment or speedy repairs. Before signing, separate the question of what equipment you must have from who is selling it to you and what they are responsible for.

1. Identify the seller and the legal framework governing supply

The Czech Republic has no specific franchise law. Franchise agreements are usually concluded as contracts not specifically defined by law under Section 1746(2) of Act No. 89/2012 Coll., the Civil Code. However, equipment supply is also assessed according to the substance of the arrangement: it may be a sale, a lease or a supply that includes installation and other work. Liability for defects depends on the relevant general rules and the agreed terms.

The franchisor that approved the equipment is not necessarily its seller. If you buy equipment from an independent supplier, you will generally pursue claims for defects against that supplier. A promise from head office to “sort everything out” does not automatically transfer that liability.

Before paying, draw up a simple checklist:

• who accepts the order and enters into the sale contract;
• whom you pay and who issues the invoice;
• who installs and commissions the equipment;
• whom you notify of defects and who carries out servicing.

If the franchisor supplies the equipment directly, ask for a separate sale contract or a clearly distinct section of the documentation. The equipment price, handover arrangements and liability for defects should not be buried in a vaguely defined package of services.

2. A list of brands is not enough: agree specifications and fitness for use

The description “equipment meeting network standards” does not tell you whether it can cope with your planned operations. The order or appendix should specify the model, quantity, technical specifications and accessories, and state whether the equipment is new, used or refurbished. For used equipment, record known wear and tear and any available service history.

The supplier should know the intended purpose and operating conditions. Occasional use places different demands on equipment from continuous operation. Explicitly agree the required capacity, dimensions, connection requirements and compatibility with other equipment. If the franchisor chooses the equipment, obtain written confirmation that the particular configuration meets the franchise concept’s standards.

Allocate responsibility for preparing the site as well. Who will check the electrical wiring, water supply, ventilation or floor load capacity? Without a clear allocation, the seller may blame unsuitable conditions while the installer blames an unsuitable machine.

Distinguish between rights relating to defects and a quality guarantee. They are not the same thing. A guarantee may offer additional protection, but this depends on its terms, who provides it and its exclusions. You are not buying as a consumer, so you cannot automatically expect consumer complaints rules or their time limits to apply.

3. Accept equipment on the basis of testing, not boxes delivered

Signing a delivery note confirming the number of packages is not the same as checking that the whole installation works. Agree in advance whether handover includes installation, commissioning, operational testing and delivery of documentation. Also specify who is authorised to confirm the results on your behalf.

Acceptance testing should reflect actual use. Where equipment performance depends on connections to other systems, showing that an indicator light comes on is not enough. Set measurable criteria for passing the test and a procedure to follow if it fails.

The handover report should record, in particular:

• the models and serial numbers of the equipment supplied;
• test results and any defects identified;
• missing components, manuals and required documents;
• deadlines for remedying defects and the people responsible.

Do not sign a statement accepting the equipment as free from defects if you have not been able to test it. Record specific reservations and document its condition. Discuss with a lawyer whether to make payment of the outstanding balance conditional on successful acceptance testing. The conditions must be objective: a vague reference to the “buyer’s satisfaction” alone invites further disputes.

4. Separate defect claims from rapid operational support

A statutory claim relating to a defect does not guarantee that a technician will arrive before you open in the morning. Alongside the seller’s liability, agree servicing terms covering how to report problems, support availability, response times, timeframes for on-site attendance and spare parts availability. Distinguish between acknowledgement of a request and actually getting operations running again.

Check who pays for diagnostics, transport, dismantling and reinstallation. For essential equipment, ask about a replacement unit or an approved temporary alternative. If every replacement machine requires the franchisor’s approval, you will also need a workable fast-track approval process.

Report defects in a way that provides proof of notification, and without undue delay after discovering them. Keep service records and follow the prescribed maintenance schedule. Have a lawyer review any limits on compensation for loss or damage, as well as the conditions attached to individual remedies: repairing the equipment may not, in itself, cover losses caused by business interruption.

Practical takeaway: Before buying, ensure three documents work together: a precise specification, acceptance procedures and servicing terms. For every obligation, it must be clear who will fulfil it, by when and what remedy you can seek if they fail.