Franchising in Greece: assessing genuine profitability

A shop that makes money for its founder is not automatically a viable franchise proposition. It may rely on unpaid work, owner-occupied premises or preferential agreements that cannot be replicated elsewhere. Before bringing franchisees into your network, you need to answer a specific question: does the outlet remain profitable when it bears the real costs of an independent franchisee?

1. Separate business profit from the founder’s advantages

Start with actual figures for a period covering the full seasonal cycle. One good month or a busy tourist season is not enough. Ask your accountant for monthly profit and loss statements, separating sales excluding VAT, cost of goods sold and operating expenses.

Then prepare a second, adjusted statement. This does not replace your accounting records; it shows how the same outlet would operate without the current owner’s personal advantages.

Pay particular attention to:

• Work by the founder and family: record their duties, hours and the full cost of replacing them with paid staff.
• Owner-occupied premises: allow for a reasonable market rent rather than treating the premises as free.
• Special discounts: distinguish ongoing commercial agreements from personal or temporary supplier concessions.
• One-off income: show grants, compensation payments and unusually large orders separately.
• Deferred expenditure: include maintenance, equipment replacement and essential services you currently provide yourself.

Record the reason and supporting evidence for each adjustment. This moves the discussion beyond an impression that ‘the shop is doing well’ and grounds it in verifiable assumptions.

2. Calculate profitability from the franchisee’s perspective

The adjusted figures for the existing shop are the starting point, not the final model. Add the costs the franchisee will actually bear: ongoing royalties, advertising contributions, mandatory software and other recurring charges. At this stage, you are not setting those fees; you are checking whether the business can sustain their combined cost.

Watch out for double counting. If a service is already included in an ongoing fee, it should not appear again as a separate expense. Conversely, a service provided free to the pilot outlet but charged to franchisees must be added.

Also distinguish between three different measures: operating profit or loss, accounting profit or loss, and cash flow. Depreciation affects accounting profit without involving a payment in the same period. Loan principal repayments use cash without being an operating expense. Stock purchases may also take place well before the proceeds from their sale are received.

Finally, separate the franchisee’s remuneration for day-to-day work from the return on their invested capital. If the reported ‘profit’ is effectively a wage for exhausting levels of personal work, the proposition needs reassessing.

3. Test the break-even point and weaker trading periods

Calculating the break-even point shows the sales needed to cover costs. First, classify expenses as fixed or variable. Costs that rise in steps, such as hiring staff for an additional shift, need separate treatment.

Break-even sales = fixed costs ÷ contribution margin ratio.

The contribution margin is what remains from sales after variable costs. Include any turnover-related charges in the calculation where applicable. Use the same time period throughout and figures excluding VAT.

Next, examine a base case and an adverse scenario. What happens if transaction numbers fall, raw material costs rise or more staff are needed? Choose changes supported by the business’s experience and available supplier quotations, rather than arbitrary percentages.

Convert the required sales into daily transactions using the average transaction value. Check whether the premises, equipment and team can actually handle that volume. A financial model is not credible if it requires capacity the shop does not have.

4. Set expansion criteria and limits on how you present the figures

Greece has no dedicated law providing a comprehensive framework for franchising, nor a specific statutory requirement for pre-contractual disclosure using a standardised form. However, the general provisions of the Greek Civil Code apply, particularly Articles 197–198 on good faith in negotiations and pre-contractual liability. Agreements are also subject to Law 3959/2011 and, where the relevant conditions are met, Article 101 of the Treaty on the Functioning of the European Union.

Financial analysis must therefore not be presented as a guarantee of returns. Clearly distinguish historical results, adjustments and forecasts. If you share figures with a prospective franchisee, explain the circumstances they relate to and the costs they include.

Before proceeding, set out in writing which results justify expansion and which require changes. If viability depends on advantages that cannot be transferred, fix the model first.

Practical takeaway: assess the outlet as though you were not its owner. Only then will you see whether you are offering a repeatable business opportunity rather than simply your own personal success.