Before Joining a Franchise in Japan: Recording Verbal Promises and Special Terms

You may be told, ‘We will make special arrangements for this outlet’, only to find no mention of those arrangements in the contract. A franchise is a community in which the franchisor and independent franchisees work together. To preserve trust over the long term, record the promises that influenced your decision to join in documents both parties can consult, rather than relying on a representative’s memory.

Why compare verbal explanations with the contract?

During franchise discussions, information is provided through recruitment materials, briefings, individual meetings, emails and other channels. Yet it is not always clear whether an explanation describes a policy that applies to every outlet, a proposal still under consideration, or a promise made specifically to you.

For example, ‘We will help you prepare for opening’ does not specify the scope of the work, when it will take place, its cost or which company will carry it out. The representative may intend to describe a general support programme, while a prospective franchisee may understand it as a promise of tailored support at no charge.

The more an explanation influences your decision to join, the more important it is to establish its contractual status. Verbal agreements can have legal significance, but whether you can later prove their terms or that an agreement was reached is a separate question. Do not assume that ‘nothing in writing means it is always invalid’ or that ‘having an email guarantees the promise will be fulfilled’.

When comparing brands, look beyond how attractive their explanations sound. Consider how willing they are to put important conditions into clear written terms. Clear answers to questions and identifiable lines of responsibility are important factors when choosing which franchise community to join.

Understand the distinction between Japan’s disclosure rules and individual promises

Japan has no single comprehensive law dedicated to regulating all franchise agreements. However, legislation requires certain pre-contract disclosures, while the Civil Code’s general principles of contract law and the Antimonopoly Act’s provisions relevant to dealings between franchisors and franchisees also apply.

Article 11 of the Act on the Promotion of Small and Medium-sized Retail Business requires franchisors whose operations qualify as a ‘specified chain business’ under the Act to provide prospective franchisees with written information and an explanation before a contract is signed. Whether a business falls within this category depends on criteria including its primarily retail nature, ongoing supply or arrangement of goods and management guidance, use of trade marks and similar rights, and collection of payments on joining. Not every agreement is covered simply because it is called a franchise.

The Japan Fair Trade Commission’s Guidelines Concerning the Franchise System under the Antimonopoly Act also set out its approach to franchising generally, not just retail and food service. They state that, when recruiting franchisees, it is desirable to disclose important information accurately so that prospective franchisees can make an informed judgement. This does not create a uniform statutory obligation to provide written documents covering every recommended disclosure item.

The key distinction is that receiving information is not the same as establishing an individual promise as a contractual term. Even if you have received disclosure documents, you should separately check whether any special terms offered to you are reflected in the contract.

List the promises and ask about discrepancies

Once you receive the draft agreement, prepare a comparison table of explanations and promises before signing. You do not need to reconstruct every conversation. Prioritise matters without which you would not have joined, which would change your financial plan, or which might have led you to choose another brand.

The following headings can help organise your list:

• What you were told and the date of the explanation
• The name, department or organisation, and role of the person who gave it
• Supporting materials, emails, quotations or other documents
• Whether there is a corresponding contractual clause or attachment
• Outstanding conditions and the answers you need from the franchisor

Briefing materials may be revised, so keep the relevant pages as well as the cover, ensuring that the version and preparation date are identifiable. After a meeting, send a confirmation email along the lines of ‘My understanding of today’s explanation is as follows’, giving the other party an opportunity to correct it. Do not, however, automatically treat a lack of reply as acceptance.

Ask questions that are more specific than ‘Will you keep your promise?’ For example: ‘Is this a contractual obligation under the franchise agreement, or a plan whose implementation is not guaranteed?’, ‘Will there be any additional charges?’ and ‘Where is this recorded in the contract?’

If the answer is ‘We normally do that’, establish the conditions under which it will apply to you. Past practice must be distinguished from a commitment to perform in the future.

Check the detail, priority and approval of special terms

For conditions that cannot be incorporated into the standard agreement, ask whether they can be clarified in special terms, a memorandum or another document. The document’s title matters less than whether it clearly states who will do what, by when and on what conditions.

Ask for special terms to identify, at a minimum, the franchisee and outlet concerned, what will be done, the deadline, who will bear the costs and the conditions of application. If an arrangement is conditional, specify what must be satisfied for it to apply. Depending on its importance, also discuss what will happen if the commitment is not fulfilled.

Check the order of precedence between documents as well. Make clear which takes priority if the main agreement, attachments, special terms and quotations conflict. Rather than simply writing ‘as set out in the attachment’, identify the document by name and date, and ensure that both parties retain the final version.

Take particular care if the contract contains an ‘entire agreement’ clause stating, for example, that it supersedes previous verbal or written agreements. Do not assume that promises made during discussions will automatically survive. Check that any conditions you wish to retain have been incorporated into the main agreement or special terms. Such clauses do not necessarily exclude legal liability for false statements or similar conduct; their specific effect requires assessment in each case.

Also check that the terms have been confirmed by someone authorised to approve them on the franchisor’s behalf, rather than merely agreed to by a sales representative. Do not leave it unclear whether this is a commitment by the franchisor that will continue after a change of representative, or simply the current representative’s personal intention.

If the franchisor refuses to put a promise in writing, ask why. If it cannot offer an individual arrangement, reconsider whether you would still join without relying on that explanation. Giving a lawyer the draft agreement, proposed special terms and records of important explanations together will make it easier to identify discrepancies between the documents.

Practical takeaway: List the promises that influenced your decision to join and, before signing, check ‘Where is this in the contract?’, ‘What conditions apply?’ and ‘Who approved it?’ This is not about distrusting the other party; it is preparation for joining the community with a shared understanding.