Buying a franchise: checking departures from the network

A network may announce new outlets while also losing franchisees. For a prospective franchisee, departures are useful evidence to consider, not automatic proof of a problem. In franchising, transparency means understanding not only who joins, but also why some leave. Before choosing a brand, investigate what happened to outlets that closed, changed hands or were taken over by the franchisor.

1. Ask for the network’s history, not just its current map

A list of active outlets shows the position today, not the journey that led there. Ask for a written record of changes over a clearly defined period, such as the past two years. This is a practical due diligence request, not a specific statutory disclosure period.

For each outlet no longer operated by its previous franchisee, ask for the following details:

• The opening date and the date of the change or closure.
• Whether it closed permanently, relocated or changed ownership.
• Whether it remained in the network under a new franchisee or became company-owned.
• The reason for the departure, as described by the franchisor.
• Whether the agreement was terminated by one party, ended by mutual consent or expired without renewal.

These categories are not equivalent. A transfer prompted by retirement is different from a closure caused by persistent losses. Similarly, an outlet that continues trading under a new owner is not a closure, although the change may warrant further investigation.

Also ask for the number of active outlets at the beginning and end of the period. This puts departures into context, allowing you to assess them against the network’s size and age.

2. Understand what Greek law actually requires

Greece has no dedicated law providing a comprehensive framework for franchise agreements. There is no specific mandatory pre-contractual disclosure document, dedicated franchise register or statutory minimum period between disclosure and signing.

This does not mean that misleading presentations of the network are permitted. The general provisions of the Greek Civil Code governing contracts and obligations apply. In particular, Articles 197 and 198 address good faith in negotiations and pre-contractual liability. Depending on the relationship, competition, intellectual property and unfair competition rules also apply.

The European Code of Ethics for Franchising is a self-regulatory framework, not Greek law. It provides for full and accurate written disclosure of material information about the relationship within a reasonable time before binding documents are signed. Ask whether the franchisor is bound by the code and what information it provides about departures.

You do not automatically have a right to access every agreement or personal detail relating to a former franchisee. You can, however, request anonymised data and explanations supported by evidence. Assessing whether material information has been withheld requires a lawyer’s advice and an examination of the specific circumstances.

3. Cross-check explanations with former and current franchisees

Ask the franchisor to facilitate contact with former franchisees who consent to being approached. Also speak to current franchisees who have been in the network for different lengths of time and operate in areas comparable to your proposed location. Do not limit yourself to the most successful examples presented during sales meetings.

Use a consistent set of neutral questions:

• What was the main reason for the departure or transfer?
• When did the first difficulties arise?
• Did they mainly concern the location, management or the working relationship with the franchisor?
• What corrective action was tried, and with what results?
• What information do they wish they had known before joining?

Keep verifiable facts separate from personal opinions. One dissatisfied account does not prove a systemic weakness, just as one positive experience does not guarantee success. Look for recurring patterns and ask the franchisor to respond to specific discrepancies.

Public announcements and, where relevant entries exist, records from Greece’s General Commercial Registry (GEMI) can help verify changes to a business. They do not, on their own, prove why a franchise relationship ended. An outlet disappearing from an online map is a starting point for a question, not a final conclusion.

4. Turn your findings into selection criteria

Create a simple table with four columns: fact, franchisor’s explanation, independent confirmation and outstanding issue. Pay particular attention to departures shortly after opening, successive changes of franchisee at the same address or recurring difficulties in similar locations.

There is no universally ‘safe’ departure rate. What matters more is why franchisees left, how comparable their circumstances are to your own plans and what has changed since. If the franchisor says it has corrected a problem, ask for specific evidence that the changes have been implemented, not just assurances.

Before committing, give the table to your lawyer and financial adviser. Ask them to assess whether the outstanding issues materially affect your choice. If the answers remain contradictory, postpone your decision until they have been clarified.

Practical takeaway: Do not choose a network solely on the strength of its new openings. Ask for a history of departures, hear more than one side of the story and record what has been verified before investing.