Opening Delays in Japan: Costs and Responsibilities to Check Before Joining a Franchise

When joining a franchise, you need to check not only the total cost of opening, but also who pays for what if you cannot open on the planned date. Even in a supportive franchise network, franchisees are independent business operators. From the stage of comparing brands, review the opening schedule alongside the conditions that trigger payments, and prepare for the risk of continuing expenditure with no sales income.

1. Break the planned opening date down into verifiable conditions

The indicative period ‘from signing to opening’ in recruitment materials is not necessarily a guaranteed timetable for your premises. Preparation time varies according to the condition of the proposed premises, the scope of building work, equipment lead times and the permits required. Do not simply ask the franchisor for its standard timetable: check the assumptions behind it.

Start by drawing up a schedule for opening. For each stage, record who is responsible, the planned completion date, the documents that will confirm completion and the conditions for moving to the next stage. For example, set out the following for each location:

• Conditions governing use of the premises and the franchisor’s approval of the location
• Finalisation of the design, approval of quotations and commissioning of building work
• Checks on permits, licences and notifications required for the intended use of the premises
• Delivery and installation of equipment, connectivity setup and operational testing
• Recruitment and completion of the preparations needed to begin trading
• The franchisor’s pre-opening checks and confirmation of the opening date

Pay particular attention to tasks that cannot proceed until an earlier stage is complete. If design changes affect equipment orders, the equipment supplier’s lead time alone will not tell you whether the overall schedule is achievable.

Where the franchisor helps with applications or contractor arrangements, clarify exactly what that support covers. ‘Helping with an application’ is not the same as ‘taking responsibility for obtaining approval by the deadline’. Identify separately the applicant, the person preparing the documents, the person submitting them and the person responsible for addressing any deficiencies. Also confirm the necessary procedures with the relevant Japanese administrative authority.

2. Separate payment start dates from the opening date

An opening delay does not automatically postpone every payment. You need to check the payment triggers in each agreement—not just the franchise agreement, but also the lease, construction, equipment, employment and loan agreements.

Create a checklist with columns for ‘cost item’, ‘payee’, ‘payment trigger’, ‘whether postponement is possible’ and ‘procedure for making changes’. At a minimum, check the following:

Cost item	Conditions to check
Rent and common-area charges	Whether these run from handover, the contractual rent commencement date or the start of trading
Construction and equipment costs	Whether payment falls due when work starts, on delivery, on inspection and acceptance, or at another stage
Ongoing fees payable to the franchisor	Whether these begin on signing, when system access starts or when the business opens
Staff costs	The employment start dates promised when hiring and how a postponement would be handled
Loan repayments and interest	The loan disbursement date, repayment start date and conditions of any repayment grace period
Marketing and stock costs	Whether schedule changes, storage, redelivery or disposal incur additional charges

Do not assume that no sales means no costs. For example, even if no sales-linked payments are due, there may be a separate fixed usage fee.

Prepare separate financial projections for opening on time and for plausible delays identified from the project schedule. Calculate fixed outgoings during the delay, one-off expenses such as additional building work or storage, and the working capital you need to retain after opening as separate items. Plotting these in a cash-flow forecast by payment date makes them easier to review and helps avoid double counting.

If you plan to borrow, ask the lender whether a change in the opening date would affect loan disbursement or the repayment schedule. Do not assume, solely on the basis of the franchisor’s explanation, that the lender will also agree to a revised timetable.

3. Check responsibilities and responses for each cause of delay

Read the contract provisions covering not only the opening deadline, but also what happens if it is missed. If the contract simply states that ‘the franchisee must open by the specified date’, ask in writing whether the franchisee would also be held responsible for delays while awaiting the franchisor’s approval or caused by a designated contractor.

It helps to group causes into categories: inadequate preparation by the franchisee, delays by the franchisor, issues involving the building contractor or landlord, and events such as natural disasters. However, categorising the cause does not automatically determine legal liability. The actual contractual relationships and individual circumstances matter.

For contractors introduced or designated by the franchisor, establish who is placing the order and contracting for the work. The franchisor does not necessarily have to compensate you for delays by a contractor simply because it designated that contractor. Also check the construction contract’s completion deadlines, delay notification requirements and procedures for approving additional costs.

Check whether the franchise agreement clearly sets out arrangements for:

• Who must be notified when a risk of delay becomes apparent, and by when
• Establishing the cause and impact of a delay and revising the schedule
• The conditions and approval process for extending the opening deadline
• Treatment of fees payable to the franchisor during the delay
• Obtaining quotations and approval before commissioning work that incurs additional costs
• The deadline for making a decision, and the available options, if there is no clear prospect of opening

A clause that merely says the parties will ‘discuss the matter’ may leave payments continuing while discussions take place. Check who bears the costs until a decision is reached. Also remember that the franchisor’s approval of an extension does not amend your contracts with the landlord or building contractor. Timetables across the relevant agreements need to be coordinated.

4. Cross-check disclosure documents and contracts, and resolve outstanding points

Japan does not have a single comprehensive law governing all franchise agreements uniformly. However, Article 11 of the Small and Medium-sized Retail Business Promotion Act requires franchisors operating a ‘specified chain business’ under the Act to provide prospective franchisees with written disclosures and an explanation before contracting. Whether a retail or food-service franchise falls within this category depends on the statutory criteria.

Do not assess opening-delay costs and responsibilities from the disclosure documents alone. Cross-check the franchise agreement, schedules, quotations, construction contract and other relevant documents. Statutory disclosure does not guarantee an opening date or compensation for delays. Even if promotional materials promise ‘comprehensive support from the franchisor until opening’, you still need to establish the precise scope of its responsibilities and the relevant deadlines.

The Japan Fair Trade Commission’s guidelines on franchise systems under the Antimonopoly Act also identify conduct that may raise competition-law concerns in dealings between franchisors and franchisees across a wide range of sectors. Conduct that uses a superior bargaining position to impose unfair disadvantages on franchisees may be problematic. However, a clause requiring the franchisee to bear delay costs is not, by itself, automatically unlawful.

Claims for damages arising from breach of contract and similar issues require consideration of both Japan’s Civil Code and the terms of the agreement. If the proposed terms require substantial payments while leaving the causes of delay or allocation of responsibility unclear, consult a lawyer before signing. Providing the project schedule, draft agreements, the franchisor’s responses and your cash-flow forecast together will help the lawyer give a more specific assessment.

Practical takeaway: Before joining, prepare a project schedule, a list of payment start dates and a table setting out how each type of delay will be handled. When choosing a brand, a key test is whether the franchisor can explain not only the planned opening date, but also the costs and decision-making procedures if that date slips.