Franchise Equipment: What to Check Before You Buy

Equipment can be one of the most expensive parts of setting up a franchise. Yet the phrase ‘turnkey outlet’ does not explain who owns the tills, fridges or machinery, who is responsible for installation, or how much downtime could cost. Across a franchise network, common standards help replicate the business format, but buyers should check the technical and legal aspects of the equipment separately — before signing a contract or transferring any money.

1. Turn the equipment list into an itemised estimate you can verify

Ask for a specification for your chosen outlet format, rather than a single overall figure for ‘equipment’. It should state the name, model, quantity, technical specifications and included components of each item. If you have not yet chosen premises, split the list into essential equipment and items that depend on floor area, electrical capacity or layout.

For each item, establish:

• whether it is included in the stated opening budget;
• whether the price includes applicable taxes;
• whether delivery, unloading, assembly and connection are included;
• whether additional consumables, fittings or software are needed;
• who pays for commissioning and operational testing;
• how long the quotation is valid and whether the price can change.

Pay particular attention to phrases such as ‘equivalent’, ‘from’ and ‘subject to agreement’. Without technical criteria, these can allow the supplier to provide equipment that nominally performs the required function but cannot cope with the expected workload. Ask for minimum performance requirements, compatibility requirements and a procedure for approving a replacement model.

Compare quotations on the total cost of a fully operational workstation, not the price of an individual device. A cheap machine supplied without installation, essential modules or local servicing may end up costing more than a package with a higher initial price.

2. Establish exactly what you will own

A franchise and its equipment are legally distinct. In Russia, commercial concession agreements are governed by Chapter 54 of the Civil Code of the Russian Federation. Such agreements grant a set of exclusive rights, which must include the right to use a trade mark or service mark. They do not, in themselves, provide for the purchase of physical assets.

Under Article 1028 of the Civil Code, a commercial concession agreement must be made in writing, and the grant of the right to use the set of exclusive rights must be registered with Rospatent, Russia’s intellectual property office. Without registration, the grant of rights is deemed not to have taken effect. This registration does not confirm either payment for equipment or the transfer of ownership of it.

Equipment supply, hire and finance leasing are governed by the relevant provisions of the Civil Code; finance leasing is also subject to Federal Law No. 164-FZ ‘On Financial Rental (Leasing)’. Establish which document covers each high-value item and who your contractual counterparty is.

Check three points:

1. The basis on which you hold the equipment. Are you buying it, hiring it or receiving it for temporary use as part of the package?
2. When ownership transfers. Does this happen on handover, full payment or fulfilment of another condition?
3. Restrictions on what you can do with it. Can you relocate, sell or replace the equipment, and will you need the other party’s consent?

If the equipment is second-hand, request purchase documents, serial numbers, repair records and confirmation that it is free of pledges and other third-party rights. Where applicable, also check Russia’s register of notices of pledges over movable property. The seller’s assurance alone is not enough to assess the risk.

3. Agree acceptance procedures, warranty terms and what happens after a breakdown

Do not assume that delivery of the boxes means the outlet is ready to operate. It is useful to distinguish between equipment handover, installation and testing under load in the contract. For each stage, specify who is responsible, the deadline and the document that will confirm completion.

Before paying, agree the acceptance procedure: who checks that all items and components are present, starts up the equipment, records defects and signs the acceptance certificate. Ensure that the certificate allows you to record reservations, and agree deadlines for rectifying defects and the consequences of failing to deliver a critical item. Signing a document stating ‘no claims’ without checking the equipment makes it harder to prove defects later.

Review the warranty terms separately. Find out who handles claims: the seller, manufacturer or service provider. Check whether servicing is available in your city, who pays call-out and transport costs, and which actions by the user invalidate warranty cover.

For equipment whose failure would bring the outlet to a halt, discuss in advance:

• the response time for a service request and, separately, the repair timeframe;
• the availability of spare parts and a temporary replacement unit;
• whether repairs by an independent technician are permitted;
• how the outlet will operate while the equipment is out of service.

Do not assume that a breakdown automatically exempts you from franchise payments. Any provision for temporarily adjusting payments must be agreed separately with the rights holder.

4. Calculate costs over the equipment’s entire working life

The purchase price is only the beginning. Prepare a separate total cost of ownership budget covering servicing, mandatory inspections, consumables, subscriptions, electricity, insurance, repairs and eventual replacement. Clarify which costs are compulsory under the brand’s standards and which are merely recommended.

If the equipment is offered on hire or under a finance lease, compare the initial payment, recurring payments, purchase option price and early termination terms. Compare the duration of that commitment with the terms of the franchise agreement and the premises lease: closing the outlet does not, in itself, terminate the other contracts.

Also check whether you can continue using the equipment afterwards. A general-purpose model is usually easier to adapt to another business format than a device with restricted software access. Find out whether the necessary licences and functions remain available after your relationship with the brand ends.

Practical takeaway: before buying a franchise, obtain four documents: an equipment specification, a comprehensive equipment cost estimate, the equipment handover terms and a servicing procedure. If it is unclear who owns the equipment, who puts it into operation and who pays when it breaks down, you cannot yet regard the opening budget as verified.