Franchising in Greece: clear renewal terms

When you turn an existing business into a franchise network, renewing the agreement may seem a distant concern. Yet your first franchisee is investing today knowing that the relationship has a fixed term. What happens afterwards affects their decision, your planning and trust across the franchise network. That is why you should design the renewal process before presenting your first agreement, not as it approaches expiry.

1. Be clear about exactly what you are promising

The phrase ‘the agreement may be renewed’ is not enough. It could mean a franchisee’s right to renew subject to specific conditions, an automatic extension unless either party objects within a set period, or simply an opportunity to negotiate a new agreement. These are different commitments, with different value for the person financing the outlet.

Work with your legal adviser to choose the model that suits your network, and state clearly:

• Who can request renewal and how.
• When the request must be submitted and when a response is due.
• How long the new term will last.
• Whether the existing agreement continues or a new one must be signed.
• Which conditions must have been met.

Avoid presenting renewal verbally as a certainty while leaving it entirely at your discretion in the contract. Your presentation of the franchise opportunity and the agreement must describe the same reality. Particularly in the early stages of expansion, an optimistic promise can easily be taken as an effective guarantee that the relationship will continue.

2. The Greek legal framework does not replace your agreement

Greece has no specific statute providing a comprehensive framework for franchise agreements, nor a dedicated statutory regime requiring pre-contractual disclosure for franchising. The general rules of the Greek Civil Code apply, including those on good faith in negotiations, the performance of obligations and the prohibition of abuse of rights. Articles 197–198, 288 and 281 of the Civil Code are particularly relevant.

You should therefore not assume that there is a general, automatic statutory right to renew every franchise agreement. The wording of the particular contract and the circumstances of the relationship are crucial. The terms for the new period also need to be reviewed under the applicable competition rules, particularly Greek Law 3959/2011 and, where applicable, Article 101 of the Treaty on the Functioning of the European Union (TFEU).

The European Code of Ethics for Franchising provides for full and accurate written disclosure within a reasonable period before a prospective franchisee commits. It is not legislation. Similarly, the published membership criteria of the Franchise Association of Greece include disclosure of the agreement’s duration and renewal terms. These are the Association’s requirements, not a general government licensing procedure for franchisors.

3. Link renewal to verifiable criteria

A workable clause goes beyond requiring ‘compliance with the system’. It explains what will be assessed and how it will be evidenced. For example, you could provide for checks on the settlement of overdue payments, the maintenance of required licences and the ability to continue operating lawfully at the premises.

Distinguish significant outstanding issues from minor shortcomings that can be put right. For issues that can be remedied, agree a written notification process and an appropriate deadline for corrective action. This gives the franchisee clarity about what they need to do and helps you avoid decisions that appear arbitrary.

Also specify who gathers the evidence and who approves renewal. A simple internal checklist can record each criterion, the supporting document, any outstanding issue and the review date. It does not replace the agreement, but it helps ensure consistent application.

If the franchisee must sign your then-current agreement, explain in good time what may change. Do not leave them to discover new charges or substantially different obligations shortly before expiry. Allow time for review and independent legal advice.

4. Plan refurbishment, costs and timing

Renewal often involves bringing the outlet into line with the network’s latest format. Before making refurbishment compulsory, define the process: who draws up the specifications, when the cost estimate will be provided and how the schedule of works will be agreed. Separate essential work from optional cosmetic improvements.

Consider the new investment alongside the length of the renewal term and the continued availability of the leased premises. A large outlay for a short period of continued operation calls for particularly careful financial assessment, without promises of a guaranteed payback. If there is a renewal fee, specify how it is calculated and which services it covers, so that it is not confused with other contractual charges.

Finally, draw up a shared timetable covering the request, assessment, disclosure of new terms, corrective action, final decision and signing. Set out in the contract what happens if discussions have not concluded by the expiry date, rather than relying on an informal continuation of the relationship.

Practical takeaway: before signing with your first franchisee, test the renewal clause against a realistic hypothetical scenario. If you cannot explain who decides, when, against which criteria and at what cost, it still needs work.