Buying a franchise: planning for delays to opening

Between signing a franchise agreement and welcoming your first customer, building work, deliveries or approvals from the franchise network may be delayed. Meanwhile, some bills will still fall due. To enter franchising with greater confidence, you need more than an opening date: you need to clarify what happens if that date is missed, who must take action and which costs you will have to cover.

1. Turn the opening date into a schedule you can track

A commercial estimate is not necessarily a contractual commitment. Before signing, ask for a schedule that distinguishes between the estimated opening date, binding deadlines and tasks that depend on third parties.

Identify the essential stages: approval of the premises by the franchisor, completion of the design, building work, delivery of equipment, installation of systems, training and internal authorisation to open. For each stage, record:

• Who carries out the work and who approves it.
• Which documents or conditions are needed before the next stage can begin.
• The deadline for completing the work or responding.
• How completion is evidenced.
• Who must be notified if an obstacle arises.

If the franchisor has to approve the design, for example, try to agree a response deadline and a procedure for correcting anything that does not meet the requirements. Do not assume that silence means approval.

Also check when the contract term starts. If it runs from the date of signing, a delay could eat into the time available to operate the business. Any adjustment to that term should be expressly agreed, rather than left to an informal promise.

2. Distinguish time-based payments from those tied to opening

The critical issue is not just how much it costs to open, but when each payment becomes due. Ask for a list of payments to the franchise network and check it against the set-up schedule.

Distinguish between amounts due on signing, on delivery of a service, when systems become available or when trading begins. Check whether minimum monthly fees, advertising contributions or technology charges apply before you make any sales. Having no turnover does not automatically suspend a contractual payment obligation.

Prepare a simple table with five columns: expense, recipient, due date, payment condition and treatment in the event of a delay. Include external costs too, such as rent, storage, insurance and wages for staff already recruited.

Work through a delayed-opening scenario with your accountant. The aim is not to recalculate the business's entire profitability, but to understand how much cash will go out while there is no revenue and which commitments can be rescheduled.

If you negotiate a postponement of payments to the franchisor, confirm exactly what has been agreed: is it a waiver, a reduction or simply a later payment date? These options have different financial implications.

3. Agree the consequences for different causes of delay

Not all delays should be treated in the same way. A late delivery attributable to the franchisor is different from building work commissioned by the franchisee or a pending decision by a public authority.

Ask for the contract to set out a procedure for identifying the cause, reporting the problem and updating the schedule. Where responsibilities are shared, there should be a way to document how tasks depend on one another, rather than automatically assigning blame to one party.

Points to negotiate include:

• A deadline for reporting the delay and proposing corrective measures.
• Rescheduling training and launch activities.
• How charges payable to the franchise network will be handled during the wait.
• Conditions for extending affected contractual deadlines.
• A final cut-off date, after which the parties reassess whether opening remains viable.

For that cut-off date, clarify the conditions for any termination and what happens to amounts already paid, materials purchased and services already provided. There is no automatic right to a refund of everything spent. A general clause covering unforeseeable events is no substitute for clear rules on foreseeable set-up problems either.

4. Understand the protections under Portuguese law

Portugal has no specific law governing franchise agreements, no dedicated register of franchisors and no pre-contractual disclosure document with legally prescribed content. This does not mean there is no legal protection.

Relevant provisions include those in the Portuguese Civil Code on freedom of contract under Article 405, good faith in negotiations under Article 227 and good faith in the performance of obligations under Article 762. General rules on breach of contract may be relevant to delays, but the consequences depend on the obligations agreed and the specific circumstances.

Where standard contract terms are used, Decree-Law No. 446/85, as amended, is also relevant, particularly regarding the communication and explanation of those terms. Take the schedule and payment terms to a lawyer, together with the contract and its annexes.

Practical takeaway: before signing, insist that three documents are consistent with one another: the opening schedule, the payment schedule and the rules for delays. An opening date is only useful if you know what happens when it is missed.