Franchising in Greece: transparency in shared advertising

When you turn an existing business into a franchise network, the promise that “we will advertise together” needs to mean something specific. Franchisees need to know where their contributions go, who makes the decisions and how results will be reported. The issue is not simply how much they pay, but whether there is an accountable management process that keeps spending on promoting outlets separate from the franchisor’s other expenses.

1. Define what the shared contribution funds

Start with your existing business’s advertising expenditure. Divide it into three categories: promotion of the brand as a whole, local promotion of a particular outlet and recruitment of new franchisees. These serve different purposes and should not be confused when asking franchisees to contribute.

Draw up a list of eligible expenses. This might include photography, advert creation, media buying and fees for external service providers. Explain exactly what each category covers. A broad phrase such as “business development expenses” leaves far too much room for interpretation.

Record the exclusions too. Recruiting new franchisees, for example, is not the same as attracting customers to existing outlets. If you intend to fund such activities through shared contributions, this requires explicit, readily understandable agreement, rather than an interpretation introduced later.

Also clarify whether company-owned outlets contribute and, if so, how. Disclosing this choice helps prospective franchisees assess how the arrangement works before committing.

2. Turn the promise into clear contractual terms

Greece has no dedicated law providing a comprehensive framework for franchising, nor a specific register for franchise agreements. The relationship is governed primarily by the general provisions of the Greek Civil Code on contracts and obligations. Depending on the activity, rules on competition, unfair competition, consumer protection, personal data and taxation also apply.

There is no specific statutory requirement for a franchise pre-contractual disclosure document or a minimum period for providing it. This does not remove the duty to act in good faith during negotiations, particularly under Article 197 of the Greek Civil Code. Franchise codes of ethics are self-regulatory instruments, not legislation.

You should therefore explain the shared advertising arrangement before signing and set it out in the agreement or in a schedule clearly incorporated into it. Specify:

• How the contribution is calculated and when it is payable.
• Permitted uses and any administration charges.
• Who approves the budget and selects suppliers.
• How often reports are provided and what they contain.
• How unspent amounts and overspending are handled.
• The procedure for changing the agreed rules.

A legal review should also check consistency between the agreement, presentations to prospective franchisees and day-to-day practice. An information brochure should not promise a right to joint decision-making that the agreement does not recognise.

3. Set up monitoring and accountability

Before collecting the first contribution, agree with your accountant how the relevant income and expenditure will be tracked separately. Separate accounting records are a useful organisational measure; they do not automatically create a legally separate fund or ring-fenced assets.

Every expense needs supporting documentation, a link to a specific activity and a recorded approval. If a related company or the franchisor’s own staff are used, explain the basis for the charge. Franchisees should be able to distinguish media buying costs from management fees.

Periodic reports can show the opening balance, contributions, expenditure by category, outstanding commitments and closing balance. Add a brief description of the activities undertaken and the results available. Do not present advertising impressions as proof of sales: different measures answer different questions.

Also establish a process for questions and access to supporting records, while protecting personal data and commercially sensitive information. Accountability requires a consistent process, not unrestricted circulation of every file.

4. Agree how promotional activity is allocated

Shared advertising does not necessarily mean equal spending on every outlet. A brand awareness initiative may benefit the network as a whole, while a local campaign targets a particular area. This distinction should be explained in advance, without guaranteeing equal customer numbers or a particular return.

Set practical criteria for selecting activities, such as seasonality, a new outlet opening or a shared commercial objective. If there is to be a franchisee consultative group, clarify whether its role is advisory or decision-making. Record decisions and the reasons for significant departures from the budget.

Finally, test the arrangement in your existing business: draw up a budget, collect supporting documents and prepare a sample report. This will show whether you can genuinely provide the information you promise.

Practical takeaway: Before asking for a shared advertising contribution, prepare three things: clearly defined permitted uses, contractual management rules and an understandable sample report. Transparency needs to be designed before money is collected.