Franchise agreement renewal: what to agree before you buy

When buying a franchise, it is easy to focus on opening your outlet and the first few months of trading. Yet the security of your investment may depend on what happens when the agreement ends. Long-term franchise relationships need clear rules: whether you can remain in the network, who makes that decision and how much the next term will cost. Check these points before paying to join.

1. Distinguish a right to renew from a promise to negotiate

A statement such as “the parties envisage the possibility of continuing their cooperation” does not offer the same protection as a clearly defined right to renew the agreement. It may mean no more than a willingness to negotiate, with no certainty about the outcome.

Look for answers to four questions in the draft agreement:

• Does renewal happen automatically, when you give notice exercising your right, or only when both parties sign a new document?
• How long will the renewal term be?
• Can the franchisor refuse renewal even if you meet the agreed conditions?
• Are the terms for the next period already set out, or will they only be presented shortly before the agreement expires?

A right to apply for renewal is not a right to renew. Likewise, priority in negotiations does not guarantee an agreement. If the network presents renewal as a given, ask it to identify the specific contractual provision that backs up that assurance.

Ask existing franchisees how their renewals worked in practice. You need to hear not only about approvals, but also about refusals, delays and additional requirements. Past practice helps you assess the franchisor, but it is no substitute for your own contractual right.

2. Check the position under Polish law

Poland has no separate statute comprehensively regulating franchising. A franchise agreement is an “innominate contract” — one not specifically defined as a contract type by statute — entered into under the principle of freedom of contract in Article 353¹ of the Polish Civil Code. That freedom has limits: the terms and purpose of the agreement must not conflict with the law, the nature of the legal relationship or the principles of social coexistence.

The Civil Code’s general provisions on the performance of obligations, liability for non-performance and the interpretation of declarations of intent also apply. Depending on the terms and circumstances, competition law and rules on combating unfair competition may also be relevant.

Franchisees have no general statutory right to renew a fixed-term agreement. The fact that an outlet is performing well, or that the initial investment has not yet been recouped, does not automatically oblige the franchisor to continue the relationship. Any potential claim requires an assessment of the agreement and the particular circumstances.

Nor is there a general franchise-specific requirement to provide a statutory disclosure document at least 14 days before signing. Codes of good practice are self-regulatory instruments, not legislation. Check whether the franchisor has committed to following them and what status the agreement gives them. Do not assume that they will, by themselves, secure your right to continue.

3. Agree measurable conditions and a decision timetable

Renewal conditions should be objectively verifiable. Phrases such as “satisfactory cooperation” or “full compliance with the network’s expectations” leave considerable scope for discretion. Specific criteria offer a better starting point: no overdue payments, a defined audit score and the correction of identified breaches.

Clarify the period over which performance will be assessed and who will carry out the assessment. Establish whether a minor breach could prevent renewal and whether you will have time to put it right. It is worth including a way to challenge errors in the assessment and a requirement for written reasons if renewal is refused.

The timetable should cover:

1. The deadline for the network to provide the terms for the next period.
2. The deadline for submitting your application or renewal notice.
3. The deadline for the franchisor’s response.
4. Time to remedy any breaches and complete the signing of documents.

It is not enough to set a deadline for the franchisee while allowing the network unlimited time to respond. The decision should be made early enough for you to plan staffing, finance and commitments to customers.

Also agree how notices must be delivered. An ordinary email will not always satisfy a requirement for written form under Polish law. Keep evidence of delivery and do not treat the franchisor’s silence as consent unless the agreement expressly gives it that effect.

4. Understand the cost of renewal before making your initial investment

Renewal may involve a new fee, a requirement to replace equipment or acceptance of the franchisor’s current standard agreement. In that case, a formal opportunity to remain in the network may not be a financially viable one.

Ask for an exhaustive list of renewal-related costs and an explanation of how they are calculated. If the amount is not known in advance, negotiate an objective calculation method, a cap or sufficient advance notice. Clarify whether the fee covers specific services and when it becomes payable.

Be particularly wary of a requirement to sign “the network’s standard agreement in force on the renewal date”. It may contain substantially different terms. Negotiate early access to the full draft and the option not to renew without an additional penalty for rejecting the new terms.

Before buying, prepare two financial scenarios: operating only for the guaranteed term, and operating for an extended term with the associated renewal costs. If recouping your investment depends on the second scenario, but renewal is entirely at the network’s discretion, treat this as a significant investment risk.

Practical takeaway: before signing, agree the renewal mechanism, criteria, deadlines and costs in writing. Do not commit to certain expenditure on the assumption of an uncertain renewal.