Buying a Franchise: Check Your Rights to Relocate

A good location can lose its appeal: customer traffic patterns change, a shopping centre is redeveloped or the business needs more space. Anyone joining a franchise network should therefore look beyond the initial site. It is equally important to establish whether a future move will be possible, and on what terms. You can assess this flexibility before buying and secure it in the contract.

1. Check what your right to operate is tied to

Start by reading how the draft contract defines the permitted business location. Does it specify an address, particular premises or a geographical area? A restriction tying the business to a particular site may mean you cannot continue operating the franchise at another address without consent — even if the new premises are only a few streets away.

Distinguish between three things: the right to operate at the existing site, permission to relocate and the right to open an additional outlet. Approval for a move does not automatically allow you to operate both sites permanently. Even a temporary overlap during the move should therefore be expressly covered.

Before making your decision, request the following documents:

• the complete draft contract, including all site-related schedules;
• the current criteria for replacement sites;
• the procedure for applying to relocate;
• any existing provisions on refurbishment, reopening and interruptions to trading.

Also ask for anonymised examples of previous relocations. What matters is not just whether a move was approved, but why, on what conditions and how long the decision took. Examples illustrate practice, but are no substitute for robust contractual provisions.

2. Agree clear rules for consent

Germany has no specific franchise legislation. A franchise agreement combines elements of several types of contract. It is governed principally by the general law of obligations in the German Civil Code (BGB) and, depending on the matter concerned, by commercial and competition law. There is no dedicated government franchise register or requirement to register franchise agreements.

For relocation, this means there is no general statutory right to move to any replacement site of your choice. The terms of the contract are therefore particularly important. Standard-form clauses are subject, in particular, to scrutiny under sections 305–310 BGB, which govern standard terms and conditions. Even in business-to-business dealings, they must meet the applicable requirements for transparency and fairness. Whether a particular consent clause is legally valid must be assessed in light of its wording and structure.

A requirement for consent may serve legitimate interests, such as ensuring the premises are suitable or coordinating site planning across the franchise network. However, a provision with no clear criteria or defined process makes planning difficult.

Negotiate the details as precisely as possible:

• Which documents must you submit for your application to be complete?
• What objective criteria will be used to make the decision?
• Within what agreed timeframe will you receive a response?
• Must any refusal be accompanied by clear reasons?
• How will you be told about any changes needed to your proposed site?

Do not treat silence as consent. Any arrangement giving silence that effect would need to be separately and validly agreed. Have the clause reviewed by a suitably qualified adviser before signing, rather than relying on a court to put matters right later.

3. Distinguish between voluntary and forced relocation

Not every move has the same cause. Moving into larger premises is different from relocating because the existing building is permanently unusable. The franchisor may also propose or require a move, perhaps as part of a revised location strategy.

For each situation, check who is responsible for what. Does the franchisor have the right to require relocation at all? What conditions and notice periods apply? Who must find suitable premises, and what happens if no suitable replacement site is available despite a documented search?

The transition period is particularly important. A contractual obligation to keep trading may conflict with an unavoidable closure. Agree how authorised interruptions will be handled and whether ongoing minimum fees will still be payable during that time. Do not assume fees will automatically be suspended.

Also clarify what support the franchisor's head office is actually obliged to provide: site assessment, adjustments to operating procedures or communications about the reopening. General promises of help are worth less than clearly defined services. Record any individual commitments in a binding agreement.

4. Assess the financial viability of a replacement site

Contractual permission to move does not, in itself, make relocation financially viable. Before joining the network, prepare your own relocation budget as a financial stress test. Include, in particular, transport, new fixtures and fittings, changes to technical systems, reopening advertising and potential lost revenue. Also check whether a fresh site assessment or approval would attract a fee, and what contractual basis there is for charging it.

Establish whether the existing fit-out standards would be sufficient at the replacement site, or whether a complete refit to the latest specifications could be required. Another key question is whether the existing franchise agreement would continue after the move or a new agreement would have to be signed. New fees or a change in the contract term should not come as a surprise after you have selected the premises.

Finally, compare the relocation costs with the remaining guaranteed contract term. A substantial investment in a replacement site shortly before the contract expires may make little financial sense if the future of the relationship is still uncertain.

Practical takeaway: Do not simply buy the right to operate at today's address. Secure a clear relocation procedure, explicit transition arrangements and predictable costs, so that a necessary move does not become an avoidable dead end.