Building a Franchise: Clear Responsibilities for Customer Complaints

In your own business, difficult customer complaints often go straight to senior management. When you build a franchise network, that direct route is no longer reliable: customers see a single brand, but often enter into contracts with different businesses. Before taking on your first franchisees, you should therefore decide who handles complaints, which decisions can be made locally and when head office provides support.

1. Start with the customer contract

Do not begin with a standard complaints form. Start by asking: Which business is the customer’s contracting party? Franchisees generally trade in their own name and on their own account. However, this does not automatically mean that every customer interaction under your brand is attributable solely to their business. Centralised ordering processes, head office’s own online offerings or different billing arrangements can affect which business is responsible.

Map out each sales channel: who makes the offer, who confirms the order, who issues the invoice and who supplies the goods or services? Then check whether customers can clearly identify these roles on order pages, in contract documents and on receipts. A shared brand identity must not obscure the identity of the contracting party.

Germany has no dedicated franchise law and no specific government franchise registration requirement. Franchise relationships are governed primarily by the general contract law provisions of the German Civil Code (Bürgerliches Gesetzbuch, or BGB) and, depending on the arrangement, other rules, including commercial and competition law. Pre-contractual disclosure duties arise from general principles of civil law, rather than a dedicated franchise disclosure statute.

The type of customer contract also matters when handling complaints. For defective goods, for example, the statutory remedies under sections 437 onwards of the BGB apply; for contracts to produce a specified result, the provisions in sections 634 onwards may apply. Not every unsatisfactory service is treated in law as defective work under such a contract. Have the rules reviewed to ensure they suit what your business offers.

2. Distinguish statutory rights, guarantees and goodwill

A robust complaints policy distinguishes between three situations. This prevents staff from accidentally treating a statutory entitlement as a voluntary concession, or making far-reaching promises that nobody has planned for.

• Statutory rights: These depend on the customer contract and the applicable law. Internal approval processes must not unlawfully obstruct or delay their fulfilment.
• Additional guarantees: Clarify who is providing the guarantee and what it covers. A manufacturer’s guarantee does not replace the customer’s statutory rights against the seller in respect of defective goods.
• Goodwill: This means voluntary concessions beyond existing entitlements. You can agree decision-making limits and arrangements for sharing the costs.

Apply these categories to typical cases from your existing business. Examples include damaged goods, late completion, dissatisfaction with the result or a request to return a non-faulty item. In Germany, there is no general statutory right to return non-faulty goods bought in a physical shop; distance contracts, however, may carry additional cancellation rights.

Develop a clear framework for goodwill gestures rather than making a blanket promise such as ‘We always give a refund’. Specify which solutions franchisees can offer independently, when consultation is required and who funds a centrally promoted goodwill initiative. This helps keep your brand promise financially sustainable.

3. Set out a simple handling process

Customers should not have to work out which internal team or business is responsible. A single point of contact for complaints can be useful, even if the responsible franchisee then handles the case. This does not automatically make head office the contracting party or liable for every customer claim.

Define a process with a few clear steps:

1. Receive: Record the issue, proof of purchase or service and the customer’s preferred solution; avoid collecting unnecessary personal information.
2. Allocate: Identify the contracting party and the responsible business without unnecessarily passing the customer from one contact to another.
3. Assess: Distinguish between statutory rights, guarantees and goodwill; seek qualified advice where there is uncertainty.
4. Decide: Identify the person responsible for the decision and any approval required.
5. Close: Confirm the solution, track its implementation and review the cause internally.

Agree realistic internal response targets. A prompt acknowledgement is not the same as a binding commitment to a final resolution. Statutory requirements and validly set deadlines remain unaffected.

You need a separate, urgent reporting route for reports of injuries, unsafe products or recurring serious failures. These cases should not be handled through the routine goodwill process.

4. Agree responsibilities and costs before launch

The franchise agreement should set out the basic allocation of responsibilities and costs. This includes the role of any central complaints team, franchisees’ duties to cooperate and rules for voluntary concessions made at head office’s request. Standard contract terms are subject, in particular, to scrutiny under sections 305–310 of the BGB, which govern standard terms and conditions. Have any blanket provisions passing on costs reviewed by a legal adviser.

Put the detailed working steps in a short procedure document. Also specify whether another location may voluntarily take on a complaint and how it will be compensated internally for the work involved. Internal agreements do not alter the customer’s statutory rights.

Before taking on franchisees, test the process using anonymised cases from your existing business. Can someone who has been briefed on the procedure identify who is responsible, recognise the next action and document the decision? If not, simplify the process.

Practical takeaway: Start by drawing up a responsibilities chart, a clear goodwill policy and an escalation route. This will help your franchise network uphold its shared promise to customers without blurring legal responsibility and the allocation of costs.