Franchise agreements: plan the exit properly

When turning an existing business into a franchise system, it is natural to think about the next opening rather than the first departure. Yet a franchise network also needs clear rules for when a business relationship ends. Planning the exit before the first agreement is signed protects continuity of service, know-how and relationships across the network, without turning the contract into a means of locking franchisees in.

1. Distinguish between expiry, termination and transfer

Ending a franchise relationship is not a single, uniform process. Before asking a solicitor to draft the agreement, set out separately what you want to happen in each situation:

• Expiry of the agreed term: when renewal is discussed, which criteria are assessed and how the decision is communicated.
• Early termination for breach: which obligations are considered essential, how a breach is documented and when an opportunity to remedy it is provided.
• Termination by mutual agreement: how the departure date, final financial settlement and outstanding matters are agreed.
• Transfer of the business: whether this is permitted, what approval is required and how the incoming franchisee is assessed.

Avoid wording that allows arbitrary decisions without a defined procedure. A minor, remediable deviation should not automatically be treated in the same way as a serious breach of confidentiality. Ask for proportionate consequences and distinct procedures for different circumstances.

Also align the term of the franchise relationship with the outlet’s actual commitments. Check the lease, equipment finance and supplier contracts. Ending the franchise agreement does not, in itself, terminate these separate contracts.

2. Place the terms within the Greek legal framework

Greece has no dedicated law comprehensively regulating franchising, nor a specific state register of franchise systems. A company’s registration with the General Commercial Registry (GEMI) relates to its general corporate obligations and does not constitute approval of its franchise system.

The agreement rests primarily on the general provisions of the Greek Civil Code: freedom of contract, good faith in the performance of obligations and the prohibition of abuse of rights. Articles 361, 288 and 281 are particularly relevant. A signed clause is therefore not automatically valid or enforceable in every circumstance.

There is no general franchise-specific regime requiring pre-contractual disclosure through a standard form and a uniform statutory waiting period. However, the general rules on pre-contractual good faith and liability apply, particularly Articles 197–198 of the Civil Code. The material consequences of leaving the network should be explained in good time, not presented as a surprise at signing. The codes of ethics and membership rules of professional associations are not the same as state legislation.

Restrictions on competition are subject, where applicable, to Greek Law 3959/2011 and Article 101 of the Treaty on the Functioning of the European Union (TFEU). Regulation (EU) 2022/720 sets out specific conditions for the exemption of vertical agreements. For a post-termination non-compete obligation, the relevant exemption requires, among other things, that it be necessary to protect the know-how transferred, be limited to the premises from which the franchisee operated and last no more than one year. Simply writing ‘one year’ is not enough; a case-specific legal assessment is required.

3. Plan the handover beyond taking down the sign

Prepare an exit schedule setting out each action, the person responsible, the deadline and evidence of completion. Distinguish between activities that must stop immediately and those requiring an agreed transition.

Outlet identity: specify when use of the trade mark must cease, when signage must be removed and how online listings will be updated. Establish who controls websites, telephone numbers and social media accounts, rather than assuming they belong to the franchisor.

Stock and equipment: provide for stocktaking, condition checks and the handling of branded packaging. If a buy-back is agreed, define the valuation method, exclusions and payment timing. Do not promise an unconditional buy-back that your business cannot finance.

Customers and outstanding services: decide who will fulfil prepaid orders and handle returns, warranties or loyalty schemes. An internal allocation of responsibilities does not override customers’ rights under applicable legislation, such as Greek Law 2251/1994.

Information and access: arrange for confidential materials to be returned and access permissions revoked. Personal data does not transfer automatically to the franchisor. Its handling must comply with the GDPR and Greek Law 4624/2019, taking account of the parties’ actual roles, the lawful basis for processing and retention obligations.

4. Test the process before signing

Run a tabletop exercise with your operations manager, accountant and solicitor. Assume that a franchisee is leaving while there are unsold products, open orders and unpaid invoices. Can each person responsible explain what they will do and under what authority?

Check that the agreement, its schedules and any commercial promises are consistent. Document the final settlement process, how charges can be disputed and the dispute resolution mechanism. Also plan neutral customer communications, without public accusations or misleading announcements.

Practical takeaway: before signing the first agreement, make sure you can describe the exit in a one-page action plan. If it remains unclear who takes responsibility for each outstanding matter, the relationship is not yet sufficiently well organised.