Buying a Franchise: Managing the Risk of a Delayed Opening

The opening date often anchors plans to buy a franchise: staff start work, supplies arrive and promotional campaigns launch. But what happens if the outlet is not ready while costs are already mounting? Responsibility for delays needs to be agreed at the outset. Do not simply accept an estimated opening date; make sure there is a project timetable, evidence of readiness and clear consequences if plans slip.

1. Turn opening promises into a timetable you can check

A statement such as “the outlet will be ready in a few weeks” is not a sufficient basis for committing funds. Ask the franchisor to explain when the countdown begins: when the contract is signed, payment is received, the location is approved, or the premises are handed over in a specified condition? Different starting points can change the entire opening plan.

Create a schedule as an appendix to the agreement, listing each task, who is responsible, its deadline and evidence of completion. At a minimum, cover:

• Approval of the design and the site’s technical specifications.
• Obtaining the permits required to operate the outlet.
• Construction work and utility installation.
• Delivery and testing of equipment.
• Recruitment, training and staff readiness checks.
• Delivery of initial stock and approval to open.

Identify tasks that depend on others being completed. Training on machinery, for example, may not be possible until the equipment is installed and electricity is available. Without this sequence, everyone may feel they have done their part, yet the outlet may still be unable to operate.

Also ask each party to appoint a single person responsible for coordination. Decisions held up because approval is needed from several departments should be visible in the timetable, rather than discussed only after a deadline has passed.

2. Calculate the cost of waiting, not just the cost of fitting out

The risk of delay goes beyond a postponed opening. Some expenses continue even before the first sale: wages, rent, standing utility charges, storage, security and financing costs, where applicable.

Divide the budget into three categories: one-off upfront payments, recurring costs before opening, and costs that should only arise once the outlet is operating. For each category, record who receives payment, when it is due, and whether it can be deferred or refunded.

Use a simple calculation: additional funding needed because of a delay = costs incurred while waiting + repeat expenditure + potential stock losses. Avoid counting the same expense twice. Repeat expenditure might include rescheduling technicians or rebooking opening promotions already arranged.

Test several plausible delay scenarios based on the project timetable. Ask whether your cash reserves will still be sufficient to run the outlet once it finally opens. Reserves exhausted before opening can no longer support the early trading period.

For perishable goods, negotiate delivery close to the point of operational readiness, rather than simply tying it to the franchise package payment date. Make sure changes to delivery dates are confirmed in writing and do not automatically trigger charges you have not approved.

3. Distinguish legal obligations from negotiated protections

Indonesia specifically regulates franchising through Government Regulation No. 35 of 2024 on Franchising, which replaced Government Regulation No. 42 of 2007. Regulation 35/2024 requires franchisors to provide a Franchise Offering Prospectus to prospective franchisees at least 14 calendar days before the franchise agreement is signed.

Use this period to compare the opening timetable in the offer with the obligations in the draft contract. If the sales presentation promises a quick opening but the contract sets no deadline or readiness criteria, request an explanation and written amendments before agreeing.

The obligation to provide a prospectus does not guarantee that an outlet will open on a particular date. Nor should you assume that compensation for delays is automatically available. Rights to defer payments, recover costs or terminate the arrangement because of a delayed opening need to be clarified in the contract and reviewed under the applicable law.

Contract law under the Indonesian Civil Code, known as the KUHPerdata, is also relevant. Article 1320 sets out the requirements for a valid agreement, including the parties’ consent and legal capacity. However, a valid contract does not in itself mean that the allocation of delay risks favours the buyer. Ask a legal adviser to review the wording on responsibility.

4. Agree a procedure for when the timetable slips

The contract should distinguish between delays caused by the franchisee, the franchisor, third parties and circumstances beyond the parties’ control. Do not assume that every supplier delay automatically qualifies as force majeure; have the definition and implications of that clause reviewed.

Negotiate a workable process covering written notice, an explanation of the cause, supporting evidence, a recovery timetable and responsibility for additional costs. Also specify who has authority to approve changes to the timetable and budget.

Clarify when recurring fees payable to the franchisor begin and when the term of your right to operate starts running. If both start before opening, understand the implications and seek any necessary adjustments. These are matters for negotiation, not automatic entitlements.

Finally, agree how long a delay is acceptable and what options are available if that limit is reached. Any refund or reimbursement of costs should have a clear basis of calculation and a payment deadline.

Practical step: before buying, prepare a single appendix covering the timetable, responsibilities, costs incurred while waiting and procedures for handling delays. Do not rely on opening promises that are not reflected in the agreed documents.