Franchise outlet equipment: ownership and costs

In an established business, ownership of the coffee machine, production equipment or furniture often seems obvious. When you build a franchise network, it becomes less straightforward: equipment may belong to the franchisor, the franchisee or a leasing company. Before offering a franchise, draw up rules for providing and using equipment. This will help candidates understand the true scope of their investment and prevent breakdowns or replacements from triggering disputes over who should pay.

1. Map ownership, not just purchases

Start with the equipment in your own outlet. List the machinery, furniture, payment terminals and other items needed to replicate the way your business operates. Separate items essential to maintaining quality from those that simply reflect the owner's personal preferences. Not every purchase made while developing the first outlet should become a requirement for the next business owner.

For each item, prepare a record covering:

• its function and minimum technical specifications;
• its owner and the document confirming ownership or other rights to the item;
• the basis on which the franchisee may use it;
• installation, running and inspection costs;
• responsibility for repairs and replacement;
• arrangements for when it is no longer used.

Do not assume that equipment used by the franchisor can automatically be passed on to a franchisee. If an item is leased, hired or supplied for use by a supplier, check the contract terms. Consent may be required for another party to use it or for it to be installed at a different location.

Check the software that controls the equipment separately. Handing over a computer or till does not necessarily give the franchisee the right to use every application installed on it. A licence may be tied to a particular business, user or location.

2. Choose how equipment will be provided and set this out in the agreement

The simplest arrangement to administer is for the franchisee to buy and own the equipment. The franchisee funds the investment, while the franchisor sets justified technical requirements. Alternatives include hiring equipment from the franchisor or using external finance. You can also combine these approaches: for example, the franchisor might retain ownership of a specialist machine while the franchisee buys standard furniture locally.

Each option allocates costs and risks differently. Buying requires the franchisee to have capital available at the outset. Hiring involves regular payments, but a hire agreement alone does not guarantee maintenance or replacement equipment during a breakdown. These services must be expressly agreed. Do not describe all equipment as ‘included in the fee’ if some costs will be charged separately.

Poland has no separate statute governing franchising. A franchise agreement is an ‘innominate contract’—one not defined as a specific contract type in legislation—based on the principle of freedom of contract under Article 353¹ of the Polish Civil Code. That freedom is not unlimited: the agreement must comply with the law, the nature of the legal relationship and the principles of social coexistence. Equipment sales, hire and leasing arrangements are also subject to the relevant Civil Code provisions governing those contracts.

Purchasing requirements must also be assessed under Poland's Competition and Consumer Protection Act and, where applicable, EU competition rules. Simply including an obligation to buy a particular device in your operating standards does not make it lawful. Justify requirements by reference to operational needs and seek legal advice on restrictions on supplier choice.

3. Prepare a breakdown procedure before the first handover

A company-owned outlet often relies on informal arrangements: the owner knows a service engineer, keeps a spare part on hand or can quickly bring equipment over from storage. A franchisee should not have to wait until a breakdown to discover that this support is unavailable.

Specify who receives fault reports, who arranges repairs and who approves the cost. Distinguish between normal wear and tear, equipment defects, damage caused by improper use and unforeseen events. A clause stating that ‘the franchisee is responsible for the equipment’ does not explain how costs will be allocated in each situation.

For critical equipment, explain how the outlet should operate during downtime. Is replacement equipment available? Who pays for transport and installation? Can some services still be provided without the item? Do not promise a return-to-service deadline that neither the franchisor nor its maintenance provider can meet.

Document equipment handovers with a report recording its condition, serial numbers and accessories, supported by photographs. Include instructions and an inspection schedule. Check the insurance arrangements too: who takes out the policy, whether it covers property belonging to others and what the user must do following loss or damage.

4. Set rules for upgrades and financial settlements

When developing a franchise, plan not only for the initial equipment but also for its eventual replacement. Distinguish between repairs that restore equipment to working order and upgrades required by the franchisor. For upgrades, the franchisee should know who makes the decision, how the change will be justified and how much notice they will receive of the expense.

Do not base financial settlements on a vague notion of ‘equipment value’. The purchase price, book value and achievable resale price may all differ. If you offer a buy-back arrangement, specify the valuation method, how the equipment's condition will be assessed and how disagreements will be resolved. When equipment belonging to another party must be returned, establish responsibility for dismantling, transport and missing items.

Test these rules against one important piece of equipment in your own outlet, from purchase through breakdown to replacement. Practical takeaway: before making your first franchise offer, prepare an equipment register, a handover report template and a table allocating responsibility for costs. The documents should enable the franchisee to establish what they are using, on what basis and what they are paying for.