Franchise complaints handling: who is responsible to the customer?

Customers see the brand above the shop door, but that does not necessarily mean their contract is with the franchisor. As a prospective franchisee, you therefore need to establish before joining who handles complaints, who authorises refunds and who ultimately bears the cost. A franchise network faces a particular challenge when head office promises a consistent customer experience but the local business lacks the authority to deliver it.

1. First, identify who contracts with the customer

A franchisee typically operates as an independent business. If a consumer buys from you, using the brand name does not, in itself, make the franchisor responsible for obligations under the sales or service contract. Nor does a central customer service team automatically mean that head office has taken over your obligations to consumers.

Ask for a walkthrough of the entire purchasing process: what does the customer see when placing an order, who confirms it, and which business appears on the receipt or invoice? Clearly identifying the contracting party is particularly important for online orders collected in store. The payment processor or the business operating the collection point is not necessarily the seller.

Draw up a simple table covering in-store purchases, the central online shop and any third-party platforms. For each, identify the seller, the recipient of complaints, the party issuing refunds and the party ultimately bearing the cost. If you receive conflicting answers, ask for a consistent written procedure before signing.

2. Distinguish statutory obligations from brand promises

In Hungary, Act V of 2013 on the Civil Code specifically recognises franchise agreements. However, this does not replace the rules governing the contractual relationship with the customer. Act CLV of 1997 on Consumer Protection is relevant to consumer complaints handling, while the Civil Code and other consumer protection provisions applicable to the transaction also matter where goods or services fail to meet contractual requirements.

As a general rule, written consumer complaints must receive a substantive written response within 30 days. Verbal complaints must generally be examined immediately and remedied where necessary. A separate question is which statutory remedies or guarantee rights consumers can exercise when goods or services fail to meet contractual requirements, and which additional rules govern those claims. The 30-day response deadline is therefore not a general deadline for completing repairs.

Keep voluntary brand promises separate from these obligations: for example, accepting in-store returns of non-faulty products or offering a satisfaction guarantee. For purchases made in person in a shop, there is no general obligation to accept returns of every product simply because the customer has changed their mind. However, if the network advertises more favourable terms, their precise scope and funding must be clear.

The internal allocation of costs under the franchise agreement cannot reduce consumers’ statutory rights. Your obligations to the consumer do not disappear simply because head office has yet to approve the internal settlement.

3. Ask for decision-making authority that matches your responsibilities

The riskiest arrangement is one in which the franchisee bears the cost of every complaint but needs head office approval for every substantive decision. Delays in approval can then easily leave your business facing legal and customer relations problems.

The complaints procedure accompanying the agreement should clarify at least the following:

• In which cases can you independently authorise a replacement, price reduction or refund?
• Who receives and forwards complaints submitted through central channels?
• How quickly must head office provide its assessment?
• Who covers for the person responsible during leave or operational disruption?
• What happens if approval does not arrive in time?

Do not settle for customer service contact details alone. There should be a designated person responsible, a documented process for forwarding complaints and a separate procedure for urgent cases. Internal response times should leave you enough time to investigate and provide the consumer with the information required by law.

4. Make the full cost of complaints traceable

The refunded purchase price is only one item. There may also be transport, inspection, repair or disposal costs, as well as staff time. Before buying a franchise, ask for an anonymised example showing how head office and the franchisee settle the costs of a resolved complaint.

A faulty product supplied by head office, a local storage error and a centrally advertised voluntary returns promotion may each require different treatment. They should not all be covered by the same vague clause. The agreement should also specify the supporting documents required, the deadline for issuing credits and how disputed items are handled.

Ask specifically about accepting returns of products bought from another franchise outlet. A consistent brand promise can be a commercial advantage, but it should not be taken for granted that you must fund returns arising from another independent business’s sales. If you are expected to offer this service, it needs a workable, verifiable internal settlement process.

5. Work through three scenarios before signing

Ask the franchisor to demonstrate how it handles a faulty product bought locally, an online order and a complaint involving another outlet. In each case, identify who responds, who decides, who pays and what documentation is produced.

Compare the answers with the agreement and the information provided to consumers. Resolve inconsistencies by aligning the documents, rather than relying on verbal reassurance. A solicitor can check legal compliance, while an accountant can review the documentation for refunds and credits.

Practical takeaway: only accept a complaints handling system that makes the responsible business clear to consumers and gives you decision-making authority proportionate to your responsibilities, together with a predictable process for allocating and settling costs.