Promissory notes in franchising: what to check before signing

Joining a franchise network may require not only an initial fee, but also security for future payments. One such form of security is a blank promissory note: a document deliberately left incomplete when signed, for example with no amount entered. Do not treat it as a routine attachment. Before signing the franchise agreement, establish who will be entitled to complete it, when and on what terms, and how they may pursue payment.

1. Understand what you are signing and which law applies

Poland has no separate statute comprehensively regulating franchising, nor any specific requirement to register franchise networks. A franchise agreement is an ‘unnamed contract’ — a type of contract not specifically defined by statute — entered into under the principle of freedom of contract in Article 353¹ of the Polish Civil Code. However, that freedom does not permit terms that conflict with legislation, the nature of the legal relationship or the principles of social coexistence. Depending on the circumstances, rules on competition, intellectual property and other areas of business also apply.

There is also no general statutory obligation to provide a prospective franchisee with a dedicated disclosure document 14 days before the agreement is signed. Such provisions have appeared in draft legislation; proposals should not be confused with law in force. Voluntary codes of good practice do not replace legislation either.

The promissory note itself is governed by Poland’s Act of 28 April 1936 on Bills of Exchange and Promissory Notes. Its significance goes beyond simply acknowledging a debt. Where the statutory conditions are met, it can make it easier for a creditor to obtain a court order for payment. This does not mean the franchisor can lawfully insert any amount it chooses, but challenging an improperly completed note may require you to actively defend your position in court.

2. Agree the completion terms before signing

A blank promissory note should be linked to a precise agreement setting out how it may be completed, usually called a promissory note declaration (deklaracja wekslowa) in Poland. To protect your position if evidence is needed, ensure that the agreement is in writing, signed by both parties, and that you have your own copy. An assurance from the network’s representative that ‘we never use the note’ does not reduce the risk.

Above all, the declaration should specify:

• The obligations covered: whether the security covers franchise fees, supplies, interest, damages or other liabilities. Avoid open-ended wording such as ‘all claims arising from the business relationship’.
• The maximum amount: set a cap and clarify whether it also includes interest and costs. A cap on the principal alone does not limit your total exposure.
• The conditions for completion: define which amounts that are due and unpaid allow the note to be used, and how they must be substantiated.
• The notification procedure: agree on a prior demand for payment, a statement of account, an address for service and a deadline for responding.
• Time limits: specify the deadline for completing the note and how this fits with the final settlement under the franchise agreement.

Ask to work through a concrete scenario: a payment is overdue, part of the invoice is disputed, and the network already holds a cash deposit. The declaration should make it possible to calculate the amount due after accounting for payments already made, rather than leaving the issue to be resolved later.

3. Check whether the note can be transferred and who is personally liable

It is not just the amount that matters, but also who will be entitled to demand payment. Transferring the note may make it harder to raise defences arising from your relationship with the franchisor. Polish law on bills of exchange and promissory notes contains specific rules on this, so a clause in the franchise agreement alone may not provide the protection you expect.

Discuss with a lawyer whether to include the wording ‘not to order’ (nie na zlecenie) on the note. This prevents transfer by endorsement, but does not prevent assignment of the claim. The distinction matters: the clause restricts a particular method of transfer rather than imposing a complete ban on a change of creditor.

Assess any request for a guarantee of the note, known as an aval, separately. If a company enters into the franchise agreement, a shareholder or director who signs as guarantor may become personally liable under the note. Do not assume that operating through a company protects your private assets from an obligation you have personally signed.

Before signing, also clarify the purpose of every signature on the document. A signature on behalf of the company and a signature as guarantor are not interchangeable. If a spouse is asked to add their signature, its legal capacity and consequences must also be established, rather than simply accepting it as ‘standard procedure’.

4. Plan for the return of the security from the outset

The end of the franchise agreement does not automatically extinguish a signed promissory note. The documents should therefore set out the procedure for releasing the security from the start. Agree a deadline for returning the original once the liabilities have been settled, and a way to confirm receipt. If the parties allow the document to be destroyed instead, specify a reliable procedure and how its destruction will be confirmed.

If the network wants to retain the note because claims remain outstanding, the agreement should require it to identify and substantiate them. Also negotiate alternatives: a cash deposit, a bank guarantee or a capped guarantee under civil law. Each has its own costs and risks: a deposit ties up cash, while a bank guarantee may use part of your banking facility limit.

Practical takeaway: do not sign a promissory note without agreeing, at the same time, the rules for completing it, the scope of any personal liability and the procedure for its return. Before joining a franchise network, have the note, the declaration and the franchise agreement reviewed together — their terms must be consistent.