Buying a franchise: who pays for refurbishments?

The initial fit-out of your premises may not be your last major property-related expense. A new brand identity, replacement equipment or a revised layout may be required while your agreement is still in force. In franchising, a consistent identity has value, but responsibilities need to be clearly allocated. Before choosing a brand, examine who decides on refurbishments, who funds them and what scope you have to negotiate.

1. Find out where the refurbishment obligation is hidden

Do not look only for a clause headed ‘refurbishment’. The obligation may appear as a requirement to comply with the current brand identity, meet upgraded specifications, replace old equipment or implement changes to the operations manual. Broad wording can have greater financial implications than a detailed initial budget.

Ask for the agreement, its technical specification schedules and the relevant provisions of the manual. If access requires a confidentiality agreement, arrange this in good time so that your advisers can carry out a meaningful review.

Distinguish between three categories:

• Maintenance: repairing wear and tear and keeping the premises in the condition already agreed.
• Regulatory compliance: work required by law, depending on the property's use and characteristics.
• Brand and operational updates: changes the franchisor requires to the network's image or operations.

For each category, record who approves the work, who pays and when it must be completed. Also check which document takes precedence if the agreement and manual contain conflicting provisions.

2. Ask for evidence of changes across the network

Asking ‘How often are outlets refurbished?’ is useful, but not enough. Request examples of recent refurbishments at outlets of a similar size and format. Separate optional improvements from mandatory work so that you are comparing like with like.

Seek written answers about the scope of the work, the notice given to franchisees, how long outlets had to close and any contribution the franchisor made towards the cost. Ask whether a new brand identity or technology upgrade is already planned that would affect the outlet you are considering.

Where possible, speak to franchisees who have been through the process. Ask what the final bill covered, what additional work arose and whether the timetable was met. Their experiences offer useful pointers, not guarantees for your own situation.

If you are buying an existing outlet, specifically ask whether the transfer triggers an obligation to refurbish immediately. An attractive purchase price may be for premises that will soon need extensive work.

3. Build a comprehensive refurbishment budget

The cost is not limited to the contractor's quote. Ask an engineer to assess technical feasibility and identify any approvals or permits that may be required. The franchisor's approval of the plans does not replace this assessment or the landlord's consent where needed.

The budget should account separately for:

• design and technical studies, building work, equipment, transport and installation,
• strip-out work, removal of materials and any storage required,
• rent and other fixed commitments during closure,
• the impact of temporary closure on takings,
• taxes, insurance cover and unforeseen technical requirements.

Work with your accountant to distinguish the accounting treatment of the expenditure from when payments will actually need to be made. If borrowing is required, assess the total financing cost and any security required before accepting a binding schedule of works.

Also compare the time remaining on the franchise agreement and the lease. A substantial investment close to their expiry needs particularly careful assessment: refurbishment does not in itself create a right to renewal.

4. Negotiate clear terms, not verbal assurances

Greece has no dedicated law providing a comprehensive framework for franchising, nor a specific statutory system of mandatory pre-contractual disclosure for franchises. The general rules of the Greek Civil Code apply, including Articles 197–198 on pre-contractual conduct and liability, Article 288 on good faith in the performance of obligations, and Article 281 prohibiting the abusive exercise of rights.

The European Code of Ethics for Franchising provides for meaningful pre-contractual disclosure, but it is a self-regulatory framework, not Greek law. Whether it applies to the particular relationship needs to be checked. Similarly, general good-faith provisions do not create an automatic right to refuse every costly change.

Ask a lawyer to negotiate written notice, a defined scope of work, a process for providing technical justification and a reasonable deadline for compliance. Consider whether you can agree a minimum interval between major refurbishments, a cap on your financial contribution or special arrangements as the agreement approaches expiry. These are negotiable safeguards, not automatic statutory rights.

Practical takeaway: before committing, obtain a written schedule setting out the required changes, who is responsible for payment, the timetable and the approval process. If these remain unclear, the true cost of joining the franchise has yet to be established.