Buying a franchise: verify the reliability of pre-contract information

Joining a franchise network is a long-term commitment, but its promotional material is not a comprehensive account of what you are buying. As a prospective buyer, you should compile your own pre-contract information pack: what have you been told, what evidence supports it, and who is responsible for its accuracy? A systematic review helps distinguish verifiable facts from sales talk and identify unresolved questions before you sign.

1. Understand what Finnish regulation requires

Finland has no specific franchise legislation, mandatory registration of franchise agreements or separate statutory requirement for a standard franchise disclosure document. Buyers therefore do not automatically receive the formal information pack they may be familiar with in other countries. This makes your own enquiries particularly important.

General legislation applies to the contractual relationship. The Finnish Contracts Act covers matters including the formation and validity of contracts and the adjustment of unreasonable terms. The Unfair Business Practices Act prohibits conduct contrary to good business practice, as well as false or misleading statements as defined in the Act. The Competition Act, in turn, affects which restrictions on competition may be included in the arrangement.

The absence of a separate disclosure law does not mean that buyers may be misled during negotiations. Equally, you should not assume that every ambiguity will later entitle you to compensation or to withdraw from the agreement. Liability and legal remedies depend on the circumstances, the information provided and its significance to your decision.

The Finnish Franchising Association’s Code of Ethics is a form of industry self-regulation, not legislation. Check whether the network has committed to it and what that commitment means in practice. A reference to the Code does not replace checking the documents. Nor should you assume that consumer protection applies to a purchase made for business purposes.

2. Request the information you need to make your decision

Start with a written request for information before signing the final agreement. The aim is not to collect as much material as possible, but to gain a sufficient understanding of what you are buying and the basis for the benefits claimed by the network.

Request at least the following:

• The concept’s track record: where and for how long the proposed business model has been used, and how your operation would differ from it.
• The contents of the franchise package: what you receive when you join, and which services mentioned in the presentation must be purchased separately or are still only planned.
• What is expected of the buyer: the skills, personal time commitment and other starting assumptions on which the arrangement is based.
• Changes that could affect your decision: any known significant changes and their expected impact on the proposed package.
• Contract documents: an up-to-date draft agreement, together with the schedules and guidance needed to assess the proposal.

These are practical information requests for buyers, not a list of mandatory contents for a Finnish disclosure document. If information is withheld, ask why and establish whether it can be verified in another way.

When buying an existing franchise business, distinguish between information supplied by the seller and by the franchisor. The seller can describe how the business currently operates, but you must confirm the future terms of joining the network with the franchisor. A benefit enjoyed by the current franchisee may not transfer to you.

3. Check claims and make uncertainties explicit

Create a simple verification table. For each significant claim, record who made it, the date, the supporting document and any outstanding question. Also note whether your purchase decision would change if the information proved incorrect.

For example, the statement ‘the concept has been tested in Finland’ needs clarification. Was it tested at a franchisor-owned outlet or in a business run by an independent franchisee? Did the test cover the same range of services and operating model that you are being offered? The aim is not to dispute the claim, but to understand how closely the evidence behind it matches your circumstances.

Distinguish between three types of information in the material:

• An established fact, supported by an identifiable source.
• An estimate or plan, whose outcome is uncertain.
• A contractual promise, which the other party is prepared to commit to.

These should not be treated as equivalent. A planned service is not an existing benefit, and a goal mentioned during a presentation is not necessarily a contractual obligation.

Check that the material is up to date, too. An old brochure may describe a previous concept or practice, however polished it looks. Ask for confirmation of which version describes the arrangement being offered to you. Where necessary, use a lawyer or another independent adviser to assess significant inconsistencies.

4. Confirm decisive information before committing

At the end of the negotiations, draw up a short list of the information on which your decision rests. Send it to the relevant party for review and ask them to correct any misunderstandings in writing. Do not treat a failure to reply as confirmation that the information is correct.

If a promise is crucial to the purchase, ask a lawyer to assess how it should be recorded in the agreement. At the same time, check any clauses stating that the agreement supersedes earlier discussions or requiring you to confirm that you have received all the information you need. Do not accept such a declaration as a routine formality if important questions remain unanswered.

Keep the material you receive in its original form, along with written questions and answers. Dated documents help establish what information was available when you made your decision. Keeping records does not in itself guarantee legal protection, but it reduces uncertainty about what was discussed during negotiations.

Practical checklist: do not sign on the strength of a persuasive presentation alone. Verify the sources of important information, resolve inconsistencies and ensure that promises crucial to your decision are recorded in the agreement.