Franchising and premises leases: how to align your agreements

Premises may meet every requirement set by the franchise network yet still become the biggest risk to your investment. This happens when the lease and franchise agreement operate on different timelines and termination terms. Before investing in a franchise in Poland, check not only the rent but also whether you can open, run and close the outlet without being left paying for premises you can no longer use under the brand.

1. Establish who leases the premises to you and which laws protect you

First, establish the basis on which you will occupy the premises. You may lease directly from the owner, sublet from the franchisor or use the space under terms set out in your cooperation agreement. Each option allocates risk differently. With a sublease, the terms of the head lease also matter: under the Polish Civil Code, a sublease ends no later than the lease under which it was granted.

In Poland, franchising is not governed by a dedicated statute or a specific franchise network registration system. A franchise agreement is an “unnamed contract” — one not defined as a specific contract type in legislation — based primarily on the Civil Code, including the principle of freedom of contract under Article 353¹. This does not give the parties unlimited discretion: competition and intellectual property laws, among others, also apply. A lease of premises is governed by the Civil Code provisions on leases.

There is also no specific statutory obligation to provide a prospective franchisee with a disclosure document. Voluntary codes of good practice are no substitute for legislation. You should therefore request the documents you need to assess the premises yourself: the draft lease, sublease terms, the network’s technical standards and written approval of the location.

If the franchisor is also your landlord, do not assume that ending the franchise relationship will automatically settle all outstanding obligations. Check both documents.

2. Align the dates and conditions for starting operations

Draw up a single timeline covering handover of the premises, design work, the administrative approvals required for your particular business, refurbishment, sign-off by the network and opening. For each milestone, record the deadline, the responsible party and the consequences of delay.

It is particularly important to distinguish between the date the lease is signed, the date the premises are handed over and the date rent starts accruing. A rent-free fit-out period does not necessarily exempt you from service charges or utility costs. Similarly, signing the franchise agreement may trigger fees before the outlet starts generating revenue.

Before making unconditional commitments, agree on:

• approval of the premises by the network — within a specified period and against known criteria;
• confirmation that the planned business activity and necessary works are permitted;
• consent for signage, installations, ventilation and other elements required by the franchise concept;
• the consequences if a required approval is refused or financing cannot be secured;
• the rules for refunding payments if the outlet does not open.

A properly drafted condition, right to withdraw from the agreement or contractual right to terminate on notice can reduce the risk. Leave the choice of mechanism to a lawyer: these options have different legal effects and should not be used interchangeably. A verbal assurance that “we’ll work something out if there’s a problem” does not provide a predictable way out.

3. Plan the end of both agreements, not just the franchise

Compare the terms of the two contracts. If the franchise ends before the lease, you may still have to pay rent without the right to use the brand. If the lease ends first, you may have nowhere to fulfil your obligations to the network. Automatic renewal of one agreement does not renew the other.

For a fixed-term lease, Article 673 § 3 of the Polish Civil Code is particularly important: termination on notice is possible in the circumstances specified in the agreement. You should therefore not assume that a fall in turnover or the loss of the franchise will, by itself, allow you to exit the lease without further costs. Separate statutory rights may also apply in connection with particular breaches or defects in the premises.

Negotiate precisely defined grounds for ending the lease early, linked to the outlet’s circumstances. Specify notice periods, required documents and any financial settlement. The landlord does not have to accept this arrangement; treat a refusal as a risk to be priced into your assessment.

Also check whether you can transfer the business to a successor. The network’s approval of a new franchisee does not replace any consent needed to take over the lease. Agree on the procedure, approval criteria and fees. Simply handing over the keys does not release the existing tenant from their obligations.

4. Calculate premises costs after the outlet closes

Prepare a separate closure budget. Include rent and charges until the lease has validly ended, removal of branding, dismantling of fittings and equipment, repairs and any requirement to restore the premises to their previous condition. Check whether the network’s deadlines for removing its branding are achievable under the rules governing access to the premises.

Establish who owns the equipment and how expenditure on improvements will be treated when the lease ends. Do not assume that the landlord will reimburse refurbishment costs or that the franchisor will remove all the equipment. The agreement may substantially alter the rules for settling these costs, so compare its provisions with your investment budget.

The deposit is not automatically a substitute for the final rent payment either. Check the conditions for its return and for the release of any other security. Document the handover of the premises with a signed report, photographs and meter readings.

Practical takeaway: before signing, prepare a table comparing both agreements: when charges start, duration, renewal, exit provisions and final settlements. Address every gap with a contractual provision or treat it as a consciously assessed and costed risk.