Buying a franchise: check the premises before signing the lease

A good location can make it easier to get started as a franchisee, but the franchisor’s approval does not guarantee that you will be legally or practically able to trade from your chosen premises. Before signing the lease, you need to bring together three things: the franchise brand’s requirements, the physical and legal status of the premises, and your obligations to the landlord. If you check these separately, you could end up paying rent on premises you cannot yet open.

1. Distinguish brand approval from the suitability of the premises

When assessing a location, a franchisor will usually consider visibility, accessibility, size, proximity to customers and how well it fits the concept. Written approval is important, but it is neither an official permit nor professional confirmation that the premises meet the necessary technical requirements.

Before reserving the premises, ask for detailed specifications: the required electrical capacity, ventilation, water connections, storage, toilets, delivery access and signage requirements. These should reflect the activities you will actually carry out, rather than simply the brand’s general outline plan.

Then check the following with the owner and an appropriately qualified professional:

• whether the building’s existing documentation permits the intended use;
• whether a change of use, building works or additional permits will be needed;
• whether ventilation, accessibility and fire safety requirements can be met lawfully;
• whether alterations to shared parts of the building require consent;
• whether external signage, a terrace or any other planned areas are permitted.

Viewing the premises is no substitute for checking the documentation. Even premises previously used for a similar business will not automatically be suitable for the scale of your operations and your equipment. In a food-service business, for example, your food preparation methods may require different ventilation from that used by the previous operator.

2. Understand which rules apply in Slovenia

Slovenia has no dedicated law comprehensively governing franchising, no specific compulsory franchise register and no legally prescribed standard pre-contractual disclosure document. This does not mean that negotiations and contracts are outside the law.

The general rules of Slovenia’s Obligations Code (OZ) are relevant to both the franchise agreement and the lease. These include the principle of good faith and fair dealing, as well as rules on negotiations, performance of obligations and liability for breaches. A franchise buyer entering into a contract for business purposes will generally not be acting as a consumer. Do not therefore rely on a consumer cooling-off period as a safeguard when leasing premises or buying a franchise.

The Building Act (GZ-1), together with spatial planning instruments and other regulations applicable to the particular location, is relevant to the building’s legal status, its use and any proposed works. Depending on the business activity, specific requirements may also apply, for example in relation to food, fire safety or health and safety at work.

The European Code of Ethics for Franchising is a self-regulatory framework for the franchise sector, not Slovenian law. Any commitment by the franchisor to follow this code does not replace the need for permits or a review of the lease. For older tenancy arrangements, a lawyer should also check when the agreement was entered into and whether any transitional rules apply.

3. Coordinate signing, deadlines and the start of payments

The greatest risk arises when the lease becomes unconditionally binding before the franchisor has given final approval for the location. It is similarly risky to pay a non-refundable initial franchise fee before you know whether you can secure and fit out suitable premises.

Prepare a coordinated timetable covering location approval, the technical inspection, required permits, handover of the premises, works and opening. For each stage, identify who is responsible and what evidence will confirm that the condition has been met.

Negotiate contractual safeguards with the landlord, such as:

• making the lease take effect only once clearly specified conditions have been met;
• a right to withdraw if the necessary approval or permit has not been obtained by an agreed date;
• precise arrangements for refunding the security deposit or reservation payment;
• a fit-out period with an agreed rent-free period or reduced rent;
• allocation of the consequences of delays according to which party is responsible.

These rights do not arise automatically: you must agree them explicitly. A phrase such as ‘rent becomes payable on opening’ can lead to disputes unless it is defined more precisely. It is better to specify a verifiable event, a final deadline and the consequences of delay. Also check whether the lease term covers your planned period of operation under the franchise agreement.

4. Agree who pays for alterations and bears the risk

Before signing, draw up a schedule of works and responsibilities. Distinguish defects in the existing premises from alterations required by the franchise brand. A general promise from the landlord that the premises will be ‘ready for business’ is not precise enough.

For each significant item, specify who will carry out the work, who will pay, the deadline and the criteria for acceptance. Pay particular attention to utility connections, ventilation, toilets, fire safety measures, the shopfront and signage. Include the costs of design work, consents and supervision where required. If an estimate relies on unverified assumptions, identify these as unresolved risks rather than treating the figure as a confirmed price.

The lease should also address ownership of installed equipment, permission for alterations, maintenance and any obligation to reinstate the premises to their original condition. Obtain written confirmation from the franchisor of the approved fit-out design, so that later design changes do not result in unexpected additional work.

Practical conclusion: before signing a binding agreement, obtain written location approval, a professional assessment of the premises’ suitability and a lease agreement aligned with these requirements. If any of these is missing, the contract should clearly state what happens if you are unable to open.