Buying a franchise: Agree clear terms for inspection visits

When you buy into a franchise network, consistent quality is part of its value. Customers need to recognise the concept, so the franchisor may want to check how you run your business. However, broad access to premises, records and staff can cause disruption and unexpected costs. Before signing, you should know exactly how these checks will be carried out.

1. Find the inspection rights across all the agreement documents

Start by gathering the provisions that give the franchisor inspection rights. These may appear in the franchise agreement, the operations manual or schedules covering quality, reporting and financial matters. Read them together: a brief requirement to follow the network’s standards may be supplemented by extensive inspection procedures elsewhere.

Distinguish between different purposes. A visit to assess the layout of your shop is not the same as a review of turnover figures or an investigation following a customer complaint. The access granted and procedures used should be appropriate to each purpose.

Ask for answers to these questions:

• What specific aspects of the business may the franchisor inspect?
• Who may carry out inspections, including external consultants?
• Which premises, systems and documents may they access?
• May they take photographs, copy material or speak to staff?
• Which standards will your business be assessed against?

Also ask for a sample inspection report and the current checklist. This makes it easier to judge whether the requirements are objective and understandable. A phrase such as ‘satisfactory operations’ is less useful than clear criteria you can use to guide how you run the business.

2. Understand the Danish legal framework

Denmark has no dedicated franchise legislation, no franchise-specific registration scheme and no statutory standard disclosure document that all franchisors must provide before an agreement is signed. General principles of contract law may, however, impose a duty to disclose material information.

Franchise agreements are governed primarily by the Danish Contracts Act and general principles of contract law. The Danish Competition Act and relevant EU competition rules may also apply. Depending on what an inspection involves, other rules may be relevant, including those on data protection and the protection of trade secrets.

There is therefore no specific Danish franchise rule that automatically determines how often the franchisor may visit you or which records it may review. The scope of inspection rights depends largely on the agreement, its interpretation and the general rules applicable to the circumstances.

You run an independent business within the network. This is a good reason to define inspection rights precisely rather than accept that the franchisor may investigate ‘all matters’ without further limits. Ask a lawyer to assess whether the access requirements are relevant and reasonably limited in relation to the purpose of the inspection.

3. Agree inspection arrangements that work for your business

A workable agreement should allow meaningful quality checks while protecting day-to-day operations. Propose separate procedures for routine visits and special investigations.

For example, routine inspections could require reasonable notice, an agenda provided in advance and a designated contact on each side. Where there are specific grounds to suspect serious issues, faster access may be necessary. The agreement should describe when this exception can be used, rather than simply granting unrestricted access without notice.

Clarify the practical arrangements too:

• Should inspections avoid peak periods wherever possible?
• May you or a representative be present?
• How will access to irrelevant or confidential information be restricted?
• Must external inspectors be bound by confidentiality obligations?
• How will the material handed over be recorded?

For example, if the franchisor needs to verify the turnover used to calculate royalties, clarify whether relevant reports will be sufficient. Full access to every business system should not be left as a vaguely defined default if a more limited approach would serve the purpose.

4. Allocate costs and secure a say in the report

The visit itself is only part of the burden. You may also spend time gathering records, making staff available and paying an adviser. Check who pays for routine inspections, additional investigations and follow-up visits.

If you must pay when non-compliance is found, the agreement should define what triggers payment and limit the costs you may be charged. Avoid open-ended wording allowing all the franchisor’s costs to be passed on to you. Instead, ask for supporting documentation, clear calculation methods and, where practical, an agreed cap.

Also agree that you will receive a written report setting out the observations, criteria applied and any supporting documents. There should be a procedure for correcting factual errors and including your comments, particularly if the report could form the basis of a claim against you.

Practical takeaway: Make sure inspection rights specify the purpose, access, notice, confidentiality, payment and reporting arrangements. This makes quality control a transparent tool for the franchise network rather than an open-ended obligation.