Relocating a Franchise Outlet: Checking Franchisor Approval and Costs Before You Sign

When setting up a franchise, the conditions under which you can relocate later are just as important as your initial location. Even a successful outlet may need to move if its lease cannot be renewed or building works are planned. To protect both consistent standards across the franchise network and your investment as a franchisee, agree the relocation approval process and costs in writing before signing. An assurance that “we can discuss it when the time comes” is not enough when you need to put down a deposit on new premises.

1. Relocation is not the franchisee’s decision alone

Article 6 of South Korea’s Fair Transactions in Franchise Business Act sets out franchisees’ obligations. These include a prohibition on changing the location of the business without the franchisor’s consent. The expiry of your existing lease does not automatically give you the right to trade under the same brand elsewhere. Your relationship with the landlord and your relationship with the franchisor must be considered separately.

However, this provision does not set a uniform assessment deadline or approval fee for every brand. In practice, the franchise agreement’s relocation clauses, premises standards and trading territory provisions are important. Check the precise wording to establish what the franchisor will assess and on what grounds it may refuse permission.

When you receive the franchise agreement, do not look only for a section headed ‘relocation’. Also read the clauses on the business address, changes to premises, temporary closure and amendments to the agreement. Ask whether closing for even a few days during the move requires separate approval. Permission under one clause does not remove obligations under another.

It helps to distinguish between voluntary and unavoidable moves. Relocating to increase sales allows a different preparation timetable from moving because a building is being demolished. Ask whether an unavoidable move can receive priority assessment or whether a temporary closure can be negotiated, but do not assume these are rights automatically guaranteed by law.

2. Get the approval process in writing before focusing on the criteria

If the franchisor says it will “assess the local trading area before approving”, first establish what you must submit for that assessment to begin. Request a list of required documents, such as the proposed address, floor plan, expected rent and details of surrounding outlets. It is also worth identifying who will handle requests for additional information. The person giving you verbal guidance may not have formal authority to approve the move.

Use the following questions to guide your discussions:

• When and how should a relocation application be submitted, and how will receipt be confirmed?
• What criteria apply to the proposed premises, including floor area, facilities and accessibility?
• What process will be followed if there are issues involving distance from existing franchisees or trading territories?
• Will requests for further information and the final decision be provided in writing, and can a processing deadline be agreed?
• Will a fresh assessment be required if the lease terms or design change after approval?

Any processing deadline discussed here is a contractual term to negotiate, not a statutory deadline applying to every relocation application. Do not assume that a missed response deadline amounts to automatic approval. If you agree a deadline, it is safer to specify how progress updates and further discussions will be handled if there is a delay.

Where possible, sign the lease for the proposed premises only after receiving the franchisor’s written approval. If you must sign first, negotiate terms with the landlord allowing the initial deposit to be refunded or the lease to be terminated if approval is refused. Simply asking the franchisor for these protections does not make them binding on the landlord. They must be included in the lease itself, and the wording should ideally be reviewed by a professional.

3. Separate relocation costs from the costs of a new agreement

The cost of moving is not limited to transport and building works. Calculate separately the cost of reinstating the old premises, the new security deposit, any period of overlapping rent, fixed costs during closure and preparations for reopening. If you must pay the new deposit before the old one is returned, your short-term cash requirement may exceed the eventual net cost of the move.

Obtain a separate breakdown of franchisor-related charges. If there are relocation assessment or reopening support fees, ask who receives the payment, what services are included, whether VAT is included and what refund terms apply if approval is refused. Check whether differently named charges cover the same work. If the franchisor requires particular works, obtain a separate quotation so you can compare costs.

In particular, establish whether relocation approval involves amending the existing franchise agreement or signing a new one. This may affect whether the expiry date stays the same, whether franchise fees or security deposits must be paid again, and when the existing deposit will be settled. Relocation does not automatically restart the agreement’s term, so consider both the time remaining and your ability to recoup the additional investment.

Also check whether royalties or fixed management fees remain payable during closure. Do not assume all charges disappear when there are no sales; read the basis on which each is charged. Include approval and construction delays in your financial planning, and check whether you could still cover rent and staff costs if reopening were postponed.

4. Finalise additional terms that also cover refusal

A relocation clause is incomplete if it only explains what happens when approval is granted. Check whether you can submit an alternative site if the first is rejected, whether a temporary closure can be negotiated if you must vacate the existing premises, and how the franchise relationship would be brought to an end if relocation ultimately proves impossible. Ask for the grounds for refusal and the method of notification to be recorded in writing as well.

Where the franchisor uses standard terms prepared in advance, South Korea’s Act on the Regulation of Terms and Conditions is also relevant. Article 6 presumes certain terms to be unfair, including those that are unreasonably disadvantageous to the customer or difficult for the customer to anticipate. However, a relocation restriction is not automatically invalid simply because it exists. Its purpose, substance and relationship with the agreement as a whole must be examined.

Bring the required application documents, authorised decision-maker, response procedure, costs, arrangements for temporary closure and agreement term together in the draft additional terms. If a quotation or separate guidance document supplied by the franchisor is to form part of the contract, identify it by its title and date. What matters is clear wording in the final agreement, rather than a representative’s assurance that “we always allow relocation”.

Before signing, work through one hypothetical unavoidable move. Starting with the date you must vacate the existing premises, work backwards to schedule the approval application, signing of the new lease, building works and reopening. This will expose gaps. If substantial spending is required before approval, or the franchisor has no deadline for responding, it is safer to improve the terms before rushing to sign.

Action summary: Do not stop at a verbal assurance that relocation is possible. Before investing, confirm the franchisor’s written approval process, whether the existing agreement will remain in force, what happens if the move cannot proceed, and when payments will fall due.