Multi-unit franchising: how to check the opening schedule

An offer to open several outlets may look more attractive than buying a single-unit franchise: the entrepreneur secures terms for expansion, while the brand gains a partner with a long-term plan. But having the option to grow and being obliged to invest to a set schedule are different things. In franchising, commitments to expand deserve particularly close scrutiny: the failure of your first outlet does not necessarily release you from opening the others.

1. Separate the right to expand from the obligation to open

Start with a simple question: are you buying the option to open several businesses, or committing to launch a specified number by set dates? The answer must come from the agreement and its schedules, not the seller’s presentation.

The wording ‘the partner is granted the right to open three outlets’ does not, on its own, amount to an obligation to open them. However, another section may contain a mandatory development plan, with a schedule setting out the consequences of failing to meet it. You therefore need to read the documents together, including any network rules referenced in the agreement.

Before signing, draw up a short table covering:

• how many outlets you may open and how many you must open;
• the deadlines for each;
• what counts as opening: the first sales, signing a formal acceptance document or approval from the franchisor;
• which conditions must be met beforehand;
• what happens if the next outlet does not open.

It is particularly important to establish which event starts the clock. If deadlines run from the date the agreement is signed, the countdown may begin before you receive the necessary materials, obtain approval for the premises or can legally use the brand.

2. Check the legal structure for expansion

In Russia, arrangements granting the use of a bundle of exclusive rights, including the right to use a trade mark, are governed by Chapter 54 of the Russian Civil Code on commercial concessions. The parties may be commercial organisations or registered individual entrepreneurs. The agreement must be in writing.

Under Article 1028 of the Russian Civil Code, the grant of the right to use this bundle of exclusive rights must be registered with Rospatent, Russia’s intellectual property authority. Without registration, the grant is deemed not to have taken effect. This should not be confused with a claim that any agreement not submitted for registration is automatically void.

Several contractual structures are possible for multiple outlets. A single agreement may cover the agreed scope of brand use, or opening further businesses may require supplementary agreements or separate contracts. Establish in advance how each additional outlet will be documented and what steps will be needed to register the grant of rights or any changes to it.

Check separately which entity will operate the businesses. If your Russian limited liability company (OOO) opens the first outlet and you plan to operate the second through another company, do not assume that common ownership automatically gives the second company the right to use the franchise. The legal basis for its operation must be agreed separately.

Ask a lawyer to compare the development plan with the scope of the rights being granted: the agreement should not oblige you to open outlets without proper arrangements for their use of the brand.

3. Calculate the cost of the expansion you are committed to

To assess a multi-unit commitment, simply multiplying the first outlet’s budget by the number of outlets is not enough. The main risk is overlapping payments: an operating business may still need working capital just as fit-out, equipment and staffing costs for the next one fall due.

Prepare a month-by-month schedule of financial commitments across all outlets. For each, separate out preparatory expenses, investment immediately before opening and the funds needed to operate until it can consistently cover its running costs. Show shared management team costs as a separate item.

Do not rely entirely on the first outlet’s expected profits to fund the next opening. Test a scenario in which the first outlet opens late or achieves lower sales than expected, while the commitments for the second remain in place.

Also request full details of the payment arrangements for expansion:

• must the entire package of rights be paid for upfront;
• is there a separate fee for each outlet;
• do recurring fees become payable before the outlet actually opens;
• does the price change if the programme is scaled back;
• must any discount be repaid if the plan is not fulfilled?

The last point can materially change the cost of the deal. An attractive package price may come with an obligation to pay extra if you abandon some of the planned openings. Check not just the size of the discount, but also the conditions for retaining it.

4. Agree a manageable schedule and the consequences of delays

A workable development plan includes not only dates but also dependencies between stages. For example, preparation for the next outlet might begin only after the previous outlet’s performance has been assessed. If this approach matters to you, it must be expressly included in the agreement: the law does not provide a general right to pause expansion because of weak sales.

Propose a process for extending deadlines when approvals are delayed by the franchisor. Specify the time allowed to respond to an application, how documents must be submitted and how any issues raised will be recorded. Otherwise, you risk being held responsible for a schedule you cannot fully control.

Then examine the consequences of a breach. Losing the right to open future outlets, having to make an additional payment and termination of the relationship for outlets already trading are fundamentally different risks. Seek a clear distinction between them: missing one opening should not put your entire existing business at risk through a provision you have overlooked.

It is useful to agree a period for remedying a breach and a procedure for reviewing the plan before penalties or other remedies are applied. Document all agreed changes in the form required by the agreement; a manager’s verbal promise that ‘we’ll move the deadline later’ is not enough.

Practical takeaway: buy a multi-unit package only after checking three things: how many openings are mandatory, where the funding for each launch will come from and what happens if you miss the schedule. The option to expand is valuable only when its terms match your resources.