Franchising in Greece: planning working capital before opening

A business can have customers and report an accounting profit yet still struggle to pay staff or suppliers. When turning your existing business into a franchise offering, you need to distinguish the cost of opening from the money needed to keep the new outlet running. For a sustainable franchise network, budgeting does not stop on opening day: it also covers the period until cash receipts stabilise.

1. Separate the investment from available cash

The set-up budget usually includes fit-out, equipment, initial stock and agreed upfront fees. Working capital covers day-to-day operating needs: purchases, payroll, rent, energy and other payments that may fall due before the corresponding cash comes in.

Do not present the sum of set-up invoices alone as the ‘total capital required’. Create three distinct categories:

• Pre-opening expenditure: everything needed to prepare the outlet.
• Operating funding: funds to cover the temporary shortfall between cash receipts and payments.
• Cash buffer: funds for delays and variances not already factored into the budget.

Record rental deposits and other funds tied up separately. These are not all immediate accounting expenses, but they reduce available cash. Similarly, initial stock should not be counted twice: once under set-up costs and again under early operating purchases.

Use figures from your existing business, adjusted to reflect the new outlet’s circumstances. The credit terms a supplier offers you after years of working together will not necessarily be available to your first franchisee.

2. Build a cash flow timetable, not just a profit forecast

Your cash flow forecast should show when money is received and when it is paid out. During preparation and the early stages of trading, a weekly breakdown helps identify cash shortages that monthly totals can hide.

Start each period with the available cash balance. Add expected receipts and deduct scheduled payments. Carry the closing balance forward to the next period. An accountant should check the timing of tax and social security obligations, as well as the treatment of VAT.

Include the following in the forecast:

• deposits and final payments for equipment,
• stock purchases and supplier payment dates,
• payroll, social security contributions and fixed costs,
• recurring franchise and advertising fees,
• finance repayments and any agreed drawings by the business owner.

Do not assume that every sale immediately becomes available cash. Where payment settlement is delayed or sales are made on credit, reflect the actual receipt dates. Nor should you treat a loan application as approved funding: the release of funds must be tied to confirmed terms and timing.

3. Test the impact of delays before committing

The key question is not simply ‘How much will the outlet sell?’ but ‘What will its lowest cash balance be before trading stabilises?’ Prepare a base case and an adverse scenario, without presenting either as a guarantee.

In the adverse scenario, consider practical setbacks: opening is delayed while rent is already accruing, cash receipts grow more slowly, stock needs replenishing earlier, or a supplier asks for payment in advance. First change each assumption separately to understand which creates the greatest pressure. Then test a plausible combination of them.

The largest cumulative cash shortfall indicates the funding requirement for that scenario, before adding the cash buffer. There is no single correct amount for every outlet. Seasonality, supplier terms and preparation time can materially change the picture.

Also agree when the plan will be reviewed and who will be notified if available cash falls below the internal safety threshold. Early warning allows adjustments before payments become overdue.

4. Explain the assumptions and limits of responsibility

Greece has no dedicated law providing a unified framework for franchising, nor a specific statutory pre-contractual disclosure regime for it. The general rules of the Greek Civil Code apply, particularly Articles 197–198 on good faith in negotiations and pre-contractual liability. Agreements are also subject to competition rules, including Law 3959/2011 and, where applicable, Article 101 of the Treaty on the Functioning of the European Union (TFEU).

For cash planning, this means explaining the basis of the figures, any exclusions and the uncertainty involved. A general disclaimer does not remedy misleading information. The European Code of Ethics for Franchising provides for full and accurate written disclosure within a reasonable time before signing; it is a self-regulatory framework, not a specific Greek law.

Give prospective franchisees time to review the forecast with an independent accountant and legal adviser. Make clear that any additional funding from the franchisor cannot be assumed unless specifically agreed.

Practical takeaway: before the first franchisee commits, require a checked cash flow forecast, documented funding and a clearly defined cash buffer. The outlet needs money not only to open, but also to keep trading.