The franchise agreement and its schedules: keeping your documents aligned

When expanding an established business into a franchise network, drafting one sound agreement is not enough. The relationship is usually also governed by several schedules and separate agreements, prepared at different times and often by different people. If they contradict one another, the first dispute may arise before the outlet even opens. Before recruiting franchisees, a practical step is therefore to check that all the contractual documents work together as a clear, coherent whole.

1. Map the documents and contracting parties

The Czech Republic has no dedicated franchising legislation. A franchise agreement is usually concluded as an innominate contract — one not specifically defined as a particular contract type — under Section 1746(2) of Act No. 89/2012 Coll., the Civil Code. It may combine elements of licensing, sale and other types of contract. This makes it particularly important to know which matters are governed by the main agreement and which by separate documents.

Start by listing everything the prospective franchisee will have to sign or be contractually bound to comply with. Alongside the main agreement, this may include a licence, an equipment purchase agreement, an IT system access agreement or a handover record. Include the operations manual too if the agreement refers to it; at this stage, however, the focus is not on its content but on its legal relationship with the other documents.

For each document, record:

• who the contracting parties are and who actually supplies the goods or services or fulfils the obligations under it;
• which obligations or rights it creates;
• when it is to be signed and when it takes effect;
• which other documents it refers to;
• who at head office is responsible for keeping it up to date.

Pay particular attention where the brand is owned by a different company from the one selling equipment or providing support. The label “head office” is not enough: the franchisee must be able to identify the specific legal entity responsible for each obligation.

2. Set an order of precedence and use consistent terminology

A typical problem arises not because there is no rule, but because there are two different rules. For example, the main agreement may promise system access upon signing, while a separate agreement provides for access only after payment and technical acceptance. Both provisions may seem reasonable in isolation, but together they create uncertainty.

Set out the order of precedence between documents explicitly and precisely. Specify which schedules form part of the agreement and how any conflicts between them will be resolved. Do not simply state, without careful consideration, that the main agreement always prevails: a specialist schedule may legitimately contain more precise rules for a particular service. A lawyer should check that the chosen hierarchy reflects how the relationship is intended to work.

For separate contracts, particularly those with other suppliers, do not assume that their terms automatically override provisions in the franchise agreement. The necessary alignment must also be reflected in the relevant agreements and accepted by their parties.

Create a shared glossary of key terms. “Commencement of trading”, “handover of the premises” and “system activation” do not necessarily refer to the same moment. If payments or obligations depend on them, their meaning must be unambiguous. Also check company names, identification details, the designation of the outlet and schedule numbering.

3. Link signing, contractual obligations and the outlet opening

The documents must make clear not only what needs to happen, but also in what order. Prepare a simple timeline of milestones from signing to opening. For each milestone, identify the responsible party, the conditions for completion and how completion will be evidenced.

For example, equipment delivery may come before installation, followed by technical checks and only then access to the necessary system functions. This is a recommended planning tool, not a legally prescribed procedure. The precise sequence must suit your franchise concept.

For each dependency, ask three questions:

• What happens if the preceding step is not completed on time?
• Who must report the delay, and to whom?
• Which subsequent deadlines and obligations change as a result?

Pay particular attention to the distinction between signing an agreement and the point at which an obligation to provide or pay for something arises. If the opening is postponed, the documents should leave no room for contradictory interpretations. Have any provisions on rescheduling, costs and responsibility for obstacles drafted to reflect the actual allocation of risk, rather than relying on a generic template.

4. Carry out a joint review before the first signing

Czech law does not require franchise agreements to be specially registered, nor does it prescribe a franchise-specific pre-contractual disclosure form. This does not, however, remove the general duties to act honestly and provide pre-contractual information under the Civil Code. Freedom of contract is also limited by other applicable rules, particularly Czech and EU competition law. A franchisee’s consent alone therefore does not guarantee that every provision is valid.

Ask a sales representative, an operations specialist and a lawyer to work through the same hypothetical scenario: the agreement has been signed, the equipment is delayed and the planned opening cannot go ahead. Each should find the same answer in the documents to the question of who must now do what. Different answers reveal provisions that need revising.

Finally, compile a single approved set of documents for signing. Label schedules with their title, version and date, and ensure that both parties actually receive them. Retain the signed version and evidence that the schedules were supplied. A link to a file that is continually overwritten is no substitute for a reliable record of what was agreed.

Practical takeaway: Before signing your first franchisee, prepare a document map, an order of precedence and a timeline of interdependent milestones. If these do not clearly identify the responsible party, the obligation and the deadline, the documents are not yet ready for signing.