Buying a franchise: Clarify how much hands-on work is expected of you

When you buy into a franchise network, you are not necessarily buying a business that others can run for you. The agreement may require you personally to manage it day to day. You should therefore establish how much hands-on work is expected of you before deciding whether the franchise model suits your lifestyle and finances.

Distinguish between ownership and day-to-day operations

Start by asking the franchisor what role you are expected to play. Must you be an active owner responsible for finances and staff, or must you also be physically present in the day-to-day running of the business? These are not the same thing.

A requirement to ‘participate actively’ can create different expectations. You might interpret it as a weekly catch-up with an employed manager, while the franchisor expects you to open the premises and serve customers yourself every day.

Ask for clarification on:

• Whether you must work full time in the business.
• Whether you must work particular days or hours, or be physically present.
• Whether you may have another job or run other businesses alongside the franchise.
• Whether an employed manager may handle day-to-day operations.
• Whether compulsory meetings and training are additional to your normal operational duties.

Check both the franchise agreement and any schedules or operating manuals it refers to. A requirement for your presence may appear somewhere other than the section setting out your obligations. Compare the requirements with the franchise’s opening hours too: long opening hours do not automatically mean you must cover all of them yourself.

Understand the Danish legal framework

Denmark has no specific franchise law that sets franchisees’ working hours or grants a particular right to delegate operations to someone else. Nor is there a franchise-specific registration scheme or a statutory list of information the franchisor must provide before the agreement is signed.

Franchise agreements are governed by the Danish Contracts Act and general principles of contract law. The starting point is freedom of contract, so the parties can agree requirements for the owner’s personal involvement. Depending on the circumstances, however, general duties of good faith and disclosure may require material information to be disclosed before the agreement is entered into.

Section 36 of the Danish Contracts Act allows unreasonable contractual terms to be amended or set aside. However, this provision is applied cautiously in business-to-business relationships. You should therefore not sign up to an unclear work requirement on the assumption that it can later be removed as unreasonable.

Other general legislation applies where relevant, including the Danish Competition Act and Marketing Practices Act. If you employ an operations manager or other staff, you must also manage those employment relationships in accordance with the relevant employment legislation, including the Danish Salaried Employees Act where the employee falls within its scope.

As a self-employed franchisee, you should not confuse the franchise agreement with an employment contract. Your options for holidays and cover in your relationship with the franchisor must be assessed on the basis of the agreement, rather than an assumption that you have standard employee rights.

Work out a sustainable working week

Draw up a detailed weekly schedule before accepting a requirement for personal involvement. Allocate time to customer service, staff management, ordering stock, administration and franchise network activities. Include tasks before opening and after closing.

The question is not simply whether you can cope during the start-up phase. Your plan must also work once the business settles into a routine and a member of staff is absent.

Then prepare two staffing plans: one in which you personally carry out the agreed operational duties, and another in which a suitably qualified person temporarily takes over your daily tasks. Calculate the difference in staffing costs with your accountant. This will show how much the business depends on your own work.

If the budget only adds up when you work substantially more than you want to, you need to consider whether the franchise model is right for you. Even a good franchise network can be the wrong choice if the owner’s role does not suit your circumstances.

Agree who can step in

Clarify the arrangements for holidays, illness and longer absences before committing. Ask whether someone covering for you needs the franchisor’s approval, what qualifications they need and how the approval process works.

A practical agreement should address:

• Who may temporarily take over day-to-day management.
• What training or experience that person must have.
• How unexpected absence is handled while approval is pending.
• When a longer absence requires a new operating plan.
• Who pays for any necessary training for the person providing cover.

The franchisor may have a legitimate interest in ensuring that customers receive the same standard of service while you are away. The aim is therefore not necessarily unrestricted freedom to choose anyone to cover for you, but a clear, workable procedure. Ask a lawyer to check that the arrangement is consistent with the agreement’s requirements for your personal management of the business.

Practical takeaway: Only buy once you can describe your normal working week, calculate the cost of cover and explain who will run the business when you are away.