Buying a franchise: check how marketing contributions are spent

When buying a franchise, you may have to fund shared marketing as well as pay an initial fee and ongoing royalties. This cost can seem straightforward until you discover that you also have to pay for local advertising, promotional discounts and the production of marketing materials. Shared marketing can benefit a franchise network, but it must be clear who collects the money, what they use it for and how you can check the spending.

1. Distinguish the shared contribution from local obligations

Start by listing all marketing-related payments. Do not just review the fee schedule: obligations may be spread across the agreement, its schedules, the operations manual and the rules for individual campaigns. Ask for the versions of these documents that will apply when you sign, and clarify which document takes precedence if they conflict.

List the following separately:

• the contribution towards shared brand advertising;
• the minimum required spending on local marketing;
• launch campaign costs;
• payments for websites, photography, printed materials or digital tools;
• the cost of discounts, vouchers and loyalty programmes.

For each item, check who receives the payment, when it is due and how the amount can be changed. If the contribution is linked to turnover, the agreement must define the calculation basis precisely, including how it treats VAT, returns, cancellations, gift vouchers and sales through third-party platforms. In particular, clarify whether the contribution is calculated on sales before the platform's commission is deducted.

Key question: does the shared contribution replace any local obligation, or are all these costs cumulative? Without this answer, you cannot meaningfully compare offers from different brands.

2. Check what the shared money actually funds

The term ‘marketing fund’ does not, in itself, mean a separate legal entity, a dedicated bank account or money legally ring-fenced from the franchisor's assets. Ask who receives the contributions, how they are recorded in the accounts and whether shared marketing has its own budget.

Request a clear description of permitted uses. These may include buying advertising space, producing content, researching customers and managing shared online channels. Check specifically whether contributions also cover franchisor staff salaries, administrative costs, fees paid to related companies or the recruitment of new franchisees.

These costs serve different purposes. Advertising products to customers supports sales, whereas advertising franchise opportunities primarily supports network expansion. If both are funded, the distinction should be explicit rather than hidden under a broad term such as ‘brand development’.

For an international brand, also find out how much money is allocated to reaching customers in Slovenia. A global campaign is not necessarily of no value, but you need an explanation of its language adaptation, reach and relevance to what you sell.

3. Agree on reporting and scrutiny of spending

A presentation showcasing a successful campaign is no substitute for a financial report. Before signing, ask for an anonymised example of a report on how contributions have been spent, and check whether it shows the amounts received, categories of expenditure and unspent balance.

Try to specify the following in the agreement:

• reporting frequency and the deadline for providing reports;
• a breakdown of spending by main category and market;
• separate disclosure of payments to related parties;
• a procedure for questions and objections;
• the option to have the accounts reviewed by an independent professional on agreed terms.

A reasonable arrangement can protect trade secrets without ruling out scrutiny altogether. Also define who pays for the review and what happens if it reveals an incorrect calculation or unauthorised spending.

Ask how franchisees are involved: is there a marketing council, who appoints its members, and does it merely make recommendations or also approve the budget? Consultation without influence over the decision is not the same as a right to participate in decision-making.

4. Take Slovenia's legal framework into account

Slovenia has no specific franchise law requiring standardised reporting for these contributions or giving franchisees an automatic right to an audit. Nor is there a dedicated mandatory franchise register or a legally standardised pre-contractual franchise disclosure document.

The Slovenian Obligations Code (Obligacijski zakonik, OZ) is central to contractual obligations, including its rules on good faith and fair dealing, negotiations, performance of obligations and the consequences of breach. The absence of a specific franchise law does not mean that misleading statements or breaches of the agreement have no legal consequences.

The Companies Act (Zakon o gospodarskih družbah, ZGD-1) also governs company accounting records and reporting. However, a company's public annual report will not generally show detailed spending of shared marketing contributions, and accounting obligations do not, in themselves, give a franchisee unrestricted access to documentation.

The European Code of Ethics for Franchising is a self-regulatory framework, not Slovenian law. Check whether the franchisor has committed to complying with it, but still put specific reporting rights into the agreement.

5. Limit changes and address unspent funds

The agreement should explain who can increase the contribution, under what procedure and with how much notice. Pay particular attention to the scope for exceptional additional charges and changes made through the operations manual. An open-ended right to impose new costs makes it harder to assess your total commitment.

Also agree how unspent funds will be carried forward, how shortfalls will be covered and whether overpayments will be refunded. Do not assume that you will be entitled to a proportionate share of the remaining balance when the franchise relationship ends; this issue must be clearly addressed.

Practical takeaway: before signing, prepare a one-page summary of all marketing payments. For each one, state the calculation basis, permitted uses, supporting evidence and how it can be changed. Make unclear items a subject for negotiation, not a surprise after opening.