Buying a franchise: check the permits before you commit

A well-known brand and an established business model do not guarantee that you can start trading from your chosen premises or continue running a business you buy without making changes. Even within a franchise network, each franchisee must establish which regulatory requirements apply to their own operations. Check permits, registrations and notifications before making a binding purchase commitment: a missing approval could delay opening while business costs are already mounting.

1. Distinguish the franchisor’s approval from regulatory requirements

Finland has no specific franchise legislation, official register of franchise agreements or legally prescribed pre-contractual disclosure document for franchise purchases. The contractual relationship is governed by legislation including the Finnish Contracts Act, as well as general principles of contract law. The Unfair Business Practices Act prohibits, among other things, misleading practices in business-to-business dealings. Competition law may also apply.

These rules are separate from the permits and notifications required for the business itself. Food businesses, for example, are governed by the Finnish Food Act and EU food legislation. Serving alcohol is subject to the Alcohol Act. The permitted use of the premises and any proposed alterations are assessed under the Finnish Building Act and the regulations applicable to the property.

Permission from the franchisor to use its concept is therefore not regulatory permission to operate. Nor do approvals granted to other outlets in the network establish that your own plans meet the requirements.

Ask the franchisor for an initial list of the permits and notifications its concept requires, but verify that list with the relevant authorities. Explain exactly what you intend to do: simply describing the business as a ‘café’ or ‘wellbeing service’ may not cover all the activities relevant to their assessment. Preparing products, serving alcohol or providing treatments to customers can substantially change the requirements.

2. Establish who holds the permit and how the purchase affects it

When buying an existing franchise business, the first question is whether you are buying the company’s shares or its business and assets. In a share purchase, the legal entity operating the business generally remains the same. In a business and asset purchase, the operator usually changes. This distinction may determine whether you need a new permit, a notification of changes or another procedure.

Do not assume, however, that the transaction structure alone means all approvals will remain valid. Changes in ownership, control, responsible personnel or the nature of the operations may also matter. For example, a licence to serve alcohol is not an asset that can be freely transferred to the buyer; the buyer’s licensing requirements and any notifications of changes must be checked separately.

Ask the seller for the following documents and information to review:

• permit decisions and their attachments, together with registration and notification details;
• the permit holder’s name and Finnish Business ID (Y-tunnus);
• the activities and premises covered by the permit, and any restrictions;
• the latest inspection reports, requests for corrective action and formal orders;
• details of pending applications and matters outstanding with the authorities.

Pay particular attention to the conditions attached to decisions. An outlet may, for example, be subject to an operating restriction that is not mentioned in the sales particulars. An outstanding requirement for remedial work may mean that work must be completed before your planned expansion.

Keep a written record of each requirement: who is responsible for dealing with it, which document confirms its status and when it must be resolved. Preliminary advice from an authority helps with planning, but it does not replace a required formal decision.

3. Check that the premises suit your particular concept

Previous use does not automatically establish that premises are suitable for a new operation. Converting a shop into a restaurant with food preparation facilities may require very different ventilation, water supply and drainage arrangements, as well as a fire safety assessment. Changes to customer capacity, opening hours or the range of services may also affect what needs to be checked.

Obtain confirmation of the premises’ approved use from the local building control authority and establish whether the proposed alterations require a permit. Where necessary, also check the requirements of the rescue authority and municipal food control authority. Use a technical specialist if the concept requires substantial alterations to the premises.

Compare the regulatory requirements with the franchisor’s layout plans. Its standard design may not suit the building without modifications. Before placing orders, establish whether the franchisor will accept the necessary departures from its standard and who will be responsible for updating the plans.

Prepare a separate cost estimate for permit-related matters. In addition to application and processing fees, include any design work, studies, inspections and remedial work. Assess the cash-flow impact of delays too: rent, financing costs and other agreed expenses may start before your first day of trading.

Ask the authority for an up-to-date estimate of processing times rather than basing your opening date on the seller’s or franchisor’s general experience. An incomplete application or a request for further information can alter the timetable. Allow some flexibility in your plans in case an application is refused or changes are required.

4. Make essential approvals conditions of the agreements

Once the permit requirements are clear, reflect your findings in the purchase and franchise agreements. A task list alone will not protect you if the contract requires you to pay and start operating regardless of regulatory decisions. Have a lawyer experienced in business acquisitions and franchise agreements ensure that the terms work together.

Where necessary, negotiate conditions making completion of the purchase dependent on obtaining specified permits or approvals. Define whether an approval carrying additional costs or operating restrictions will be acceptable. Wording such as ‘the necessary permits are obtained’ may be too vague if approval requires a refurbishment costing substantially more than planned.

Agree, at a minimum, who will submit the applications, who will provide supporting information, how costs will be shared and what deadline applies. Also set out what happens if a decision is delayed or an application is refused: will preparations continue, will the terms be renegotiated, or will the arrangement lapse with agreed consequences? A buyer has no automatic right to withdraw from every agreement simply because an expected permit is not obtained.

Practical summary: do not buy on the assumption that you have the right to operate. Verify the permit holder, the scope of the authorised activities and the suitability of the premises, and agree in writing how a missing approval will affect the purchase and payments.