Equipping a franchise outlet: how to manage the handover

When expanding an established business into a franchise network, handing over the keys and showing someone how to switch on the till is not enough. Machinery, furniture and refrigeration units are assets in their own right, with specific delivery terms and liability for defects. If their handover is treated as part and parcel of granting the franchise licence, the first breakdown could disrupt both the opening and your relationship with the franchisee. Set up a repeatable acceptance procedure before fitting out your first franchisee’s premises.

1. Identify the owner and contracting party for each item

Start with an inventory of the equipment the outlet actually needs. Do not rely solely on photographs of your own branch: record each item’s purpose, required capacity, dimensions, connections and accessories. Distinguish essential technical specifications from appearance requirements. This gives the franchisee a clear basis for checking whether the delivery is complete and fit for use.

For each item, specify whether the franchisee is buying it from head office, purchasing it directly from another supplier or simply using it under a rental agreement. This determines whom they pay and against whom they can exercise their rights if the goods are defective. Head office does not automatically become the seller simply by recommending a particular machine.

A practical equipment record should include:

• the equipment description and, once delivered, its serial number;
• the owner, seller or lessor, and user;
• the price or how it will be determined;
• the scope of transport, installation and commissioning;
• the required documents, manuals and accessories;
• a contact point for reporting faults.

For used equipment, also describe its age, known wear and tear, and service history where available. A description such as ‘working outlet equipment’ is too vague to serve as useful evidence later.

2. Separate equipment purchases from the right to use the franchise concept

The Czech Republic has no specific franchising 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. Depending on the substance of the arrangement, equipment sales are governed primarily by the general provisions on obligations, sale contracts and rights in respect of defective performance; rental arrangements are also subject to the rules on leases.

We therefore recommend dealing with equipment in a separate sale contract or a clearly distinct section of the contractual documentation. This is not a mandatory format for every franchise. It is a practical way to distinguish payments for the licence from payments for specific assets.

Agree what the price includes, such as transport, assembly, connection, a test run or removal of packaging. It is just as important to state what is excluded. Supplying a machine does not necessarily mean that the seller will arrange building alterations or the necessary electrical connection.

Handover, transfer of ownership and transfer of the risk of loss or damage are separate matters. Address them in the contract, taking account of the delivery arrangements and any retention-of-title clause. If another company transports or installs the equipment, also specify who will deal with damage discovered during unpacking. Check the tax treatment of the individual supplies with an accountant or tax adviser rather than bundling everything indiscriminately into the initial franchise fee.

3. Base the handover on testing, not just a signature

The handover record should reflect the equipment’s actual condition. Prepare it in advance, but complete it only when the equipment is received. Include the date, the people present, a list of items delivered, any missing components and any defects found. Attach photographs in a way that makes it clear which item each one shows.

Also agree appropriate functional tests. For refrigeration equipment, this might mean checking that it reaches the required temperature; for till equipment, it could involve a test transaction in the appropriate mode. The specific procedure must follow the manufacturer’s instructions and any requirements for specialist installation. The franchisee should not be expected to act as a qualified technician.

Distinguish defects that prevent safe or agreed use from minor shortcomings. For each issue recorded, identify the person responsible, the deadline for putting it right and how the remedy will be checked. Do not ask the franchisee to sign an unconditional acceptance if the equipment could not yet be tested.

For example, a missing decorative trim may not prevent opening, whereas a faulty refrigeration unit could seriously restrict operations. Set the criteria to suit the particular franchise concept, rather than the immediate pressure to meet an opening date.

4. Prepare a procedure for the first breakdown

The handover does not end when the record is filed away. The franchisee needs to know whom to notify of a fault, what supporting information to provide and who is authorised to book a service visit. Separate the exercise of rights against the seller from operational support provided by head office. Head office can coordinate a response without automatically taking on all the supplier’s obligations.

Do not promise an automatic ‘two-year warranty’. Consumer rules cannot simply be carried over to business-to-business purchases. Distinguish statutory rights in respect of defects from any contractual quality guarantee, including its scope and conditions. Deal promptly with both obvious defects and those discovered later, in accordance with the contract and applicable law.

Also agree on the availability of replacement equipment, who pays for diagnostic work and what happens if there is a dispute over the cause of a breakdown. Downtime caused by defective goods may have different consequences from damage caused by incorrect operation.

Practical takeaway: Before opening your first franchisee-operated outlet, prepare an asset inventory, clear delivery terms and a handover record that includes functional testing. Every item must have an identified owner, a documented condition and a clear procedure for dealing with faults.