Buying a franchise: check the renewal terms

Choosing a brand is not just about opening your first outlet. It is also about whether you can continue trading when the initial agreement expires. In franchising, a good working relationship matters, but it is no substitute for a clear renewal clause. Before committing, establish whether renewal is a contractual right, an option subject to conditions or simply a matter for future negotiation.

1. Distinguish a right to renew from an expectation of renewal

The phrases “the agreement may be renewed” and “the franchisee is entitled to renew provided the following conditions are met” do not offer the same security. The first may require a fresh agreement. The second may establish a specific right, depending on the contract as a whole.

Ask your lawyer to identify which of the following mechanisms applies:

• Automatic renewal: the relationship continues unless notice of non-renewal is served within the required timeframe.
• Renewal by exercising a right: you must give a specified notice and meet agreed conditions.
• Renewal by mutual agreement: both parties must agree afresh.

Also check the length of the renewal term and how many times the mechanism can be used. A promise that “partners who meet their obligations always stay with us” is not enough for your financial planning. If the franchise network’s sales presentation describes renewal as guaranteed, ask for that commitment to be reflected precisely in the contract.

2. Understand what Greek law provides

Greece has no dedicated statute comprehensively regulating franchising as a distinct type of contract. Franchise agreements are governed primarily by the general provisions of the Greek Civil Code on contracts and obligations, alongside other rules that apply as appropriate, such as competition and intellectual property law.

There is no franchise-specific statutory pre-contractual disclosure regime, mandatory standardised disclosure document or specific statutory minimum disclosure period before signing. Nor is there a dedicated franchise register. This does not mean that misleading information about the prospects of continuing the relationship is permitted.

Articles 197 and 198 of the Greek Civil Code concern good faith in negotiations and pre-contractual liability. General principles of good faith and the prohibition on abuse of rights may also be relevant when assessing conduct under a contract. They do not, however, create a general, automatic right to renew every franchise agreement.

The European Code of Ethics for Franchising provides for full and accurate written pre-contractual disclosure within a reasonable time. It is a self-regulatory framework, not a Greek law imposing mandatory disclosure. Check whether, and in what way, it binds the franchisor in question.

3. Turn the conditions into a verifiable checklist

A renewal clause may look favourable yet depend on vague criteria. Phrases such as “satisfactory performance” or “full compliance” need clarification: who assesses them, using what evidence and over what period?

Record each condition in a table with four columns: requirement, supporting evidence, deadline and consequence of non-compliance. In particular, consider:

• Whether the required targets are known from the outset or can be changed unilaterally.
• Whether a past breach that has been remedied can still prevent renewal.
• Whether written notice and a reasonable opportunity to remedy a breach are provided before renewal is refused.
• Whether all outstanding amounts must be paid, even where there are documented grounds for disputing a sum.

Pay attention to the procedure too. When must the request be submitted? To which address, and with what proof of receipt? By when must the franchisor respond? Do not assume that silence amounts to acceptance unless the agreement clearly provides for this. Ask for a response deadline that allows meaningful planning, rather than a last-minute decision.

4. Treat renewal as a fresh financial decision

Renewal may require you to sign the “then-current agreement”. This means the next term could involve different financial and operational conditions. Ask for clarification on which elements will remain fixed and which may change.

Check whether there is a renewal fee, how it is determined and whether it comes with additional obligations. Also ask to receive the new draft agreement in good time, so you can review it before your decision deadline expires.

With your accountant, compare two scenarios: trading only for the initial binding term, and continuing through a renewal term on the potential new conditions. Do not treat revenue from the second term as guaranteed if continuation depends on a future agreement. If the investment only makes financial sense with renewal, the clarity of that clause should be a key factor in your choice of brand.

Practical takeaway: Before signing, ask for written answers to four questions: who decides on renewal, on what conditions, by when and at what cost? Anything that remains uncertain must also be treated as uncertain in your investment planning.