Franchise equipment: ownership, servicing and breakdown costs

Ready-to-use premises do not necessarily mean you will own the equipment, and promised servicing may not cover every repair. When joining a franchise network, establish not only which equipment you will receive, but also the terms on which you can use it. These determine your start-up costs, the consequences of a breakdown and how the equipment will be dealt with when the relationship ends.

1. Establish what you are buying and what you are only allowed to use

Ask for an itemised equipment inventory to be attached to the agreement. It should cover the equipment needed to run the outlet, such as refrigerators, ovens, coffee machines, payment terminals, computers and furniture. Each entry should ideally specify the model, serial number, condition and owner. The phrase ‘fully equipped premises’ alone settles none of these points.

Paying to set up an outlet does not automatically mean you are buying the equipment. Equipment may be sold, hired, leased or made available under the terms of the franchise agreement. Some items may belong to a product supplier rather than the franchisor.

For each category of equipment, establish:

• which document gives you the right to use it;
• whether you pay a one-off charge, recurring payments or an amount included in another fee;
• when ownership transfers to you, if at all;
• whether you are required to buy or return it;
• who can demand its return and in what circumstances.

If you are buying used equipment, check the purchase documentation and any existing charges or other encumbrances. For leased equipment, make sure that allowing you to use it complies with the financing terms. A franchisor’s assurance that ‘everything is sorted’ is no substitute for the relevant documents or required consents.

2. Put servicing responsibilities in writing, rather than relying on promises of help

In Poland, a franchise agreement is an ‘unnamed contract’: it has no separate, comprehensive statutory framework. It is governed by the general provisions of the Polish Civil Code, including the freedom of contract principle in Article 353¹ and the rules on performing contractual obligations and liability for breaches. Depending on how the equipment is provided, rules on sale, hire or leasing may also apply. General rules on competition, tax and equipment safety are also relevant.

There is no legally prescribed, standard franchise disclosure document, nor a specific requirement to provide one to a prospective franchisee 14 days before signing. You should therefore agree your own deadline for receiving the equipment inventory, financing terms and servicing documentation before making a commitment.

Separate the responsibilities for routine maintenance, inspections, repairs and replacement. For each, specify who carries out the work and who pays. Clarify charges for call-outs, diagnostics, parts, transport and work outside normal hours.

A service response time is not the same as a repair time. Acknowledging a fault report the following day does not guarantee that you can resume trading. Agree separate deadlines for initial contact, diagnosis and repair, along with arrangements for providing replacement equipment while yours is out of action. Ask who can authorise an emergency repair if the designated service provider is unavailable.

Also check who holds the warranty rights and who can make a claim. In business-to-business transactions, statutory liability for defects under Polish law, known as rękojmia, may be limited or excluded by contract, subject to statutory exceptions. Do not assume you have the same protection as a consumer making a purchase.

3. Calculate the cost of a breakdown and check the insurance

Prepare a separate equipment budget when comparing offers. Include not just the purchase price or instalments, but also installation, commissioning, mandatory inspections, consumables and anticipated repairs. Check whether quoted amounts include or exclude VAT and when payment is due.

Next, work through a simple scenario: a key piece of equipment stops working and the outlet cannot trade normally. Establish which costs you must continue paying, whether you will have to dispose of stock and whether the agreement provides for any financial adjustment during downtime. Do not assume that a loss of sales automatically suspends franchise fees.

Ask about insurance for both equipment you own and equipment entrusted to you. Compare the agreement’s requirements with the policy’s actual cover, particularly for mechanical breakdown, electrical damage, flooding and loss of stock. Business interruption cover may require a separate policy extension and may depend on the cause of the damage.

Also establish the policy excess, any security and inspection requirements, and who receives the insurance payout. A payment to the equipment’s owner does not necessarily mean you will receive funds to cover your own losses.

4. Prepare for equipment handover and its eventual return

Before opening, draw up an equipment handover report with photographs, serial numbers, descriptions of defects and the results of operational tests. Obtain the manuals, inspection records and required technical documentation. If the equipment is used, record any visible wear. This will make it easier to distinguish pre-existing defects from damage occurring while you run the business.

Agree the required condition of returned equipment before signing the agreement. The terms should distinguish fair wear and tear from damage you must make good. Set out how missing items and damage will be valued, and how you can record your own objections to the return inspection report.

Specify who dismantles and transports the equipment, who bears the risk during those activities and when the deposit will be refunded. If a buyout is provided for, the price or the method used to calculate it should be clear in advance.

Practical takeaway: before buying a franchise, prepare a single table covering each item of equipment, its owner, your legal basis for using it, its full cost, servicing arrangements and how it will be dealt with on exit. Resolve every blank entry in the documentation before signing the agreement.