Buying a franchise: check the signatory’s authority

When buying a franchise, you may negotiate with the brand’s founder, a development manager or a broker, only to receive the agreement from someone else. A friendly relationship and a company email address do not prove that someone has authority to act on the company’s behalf. Before joining a franchise network, check one specific point: can the person signing the agreement and confirming the agreed terms legally bind the franchisor?

1. Distinguish your contact from the authorised signatory

The person presenting the franchise is not necessarily its legal representative. A sales adviser may arrange a visit to an outlet, send you an offer and collect documents, but this does not in itself give them authority to sign the agreement or approve a discount. The same applies to the company’s founder: ownership alone does not confer unlimited authority to act on its behalf.

First, ask for the full registered name, registered office and identifying details of the company that will act as the franchisor. Then ask who will sign the agreement and on what basis they are authorised to do so. Do not settle for a statement that the signatory is ‘responsible for Slovenia’ or the ‘development director’; a job title is not the same as legal authority.

Draw up a short list of the people involved and their roles:

• who handles the presentation and negotiations;
• who may approve departures from the standard offer;
• who will sign the agreement;
• who will approve amendments and additional obligations after signing.

Clarifying these roles is not a sign of distrust. In a well-organised franchise network, it prevents misunderstandings and ensures that decisions are approved by the right person.

2. Check the register and the scope of authority

For a Slovenian company, check the current details of its representatives and how they may act in the relevant public registers maintained by AJPES, Slovenia’s Agency for Public Legal Records and Related Services. The name is not the only important detail: you also need to establish whether the person may act alone or must act jointly with another representative. If joint representation is required, one signature may not be enough.

Compare the register details with the draft agreement. The registered name and identifying details should refer to the same legal entity, not simply a company with a similar name or another company in the same group. Carry out this check shortly before signing, as representatives can change even while negotiations are under way.

If someone will sign under a power of attorney, ask to see it. With a lawyer, check in particular:

• who issued it and whether they had authority to do so;
• which company the authorised person represents;
• whether it covers entering into the specific franchise agreement;
• whether it contains any limits on duration, scope or other matters;
• whether it has been issued in the required form.

Authority to negotiate does not necessarily include authority to enter into an agreement. Likewise, authority to sign one agreement does not automatically extend to signing later amendments.

For a foreign franchisor, request equivalent evidence from its official register. Rules on representation and the evidential value of documents may differ, so have them checked by a lawyer familiar with the relevant legal system. Keep the register extract with the contractual documents, together with the date of the check.

3. Understand the Slovenian legal framework

Slovenia has no specific franchising act, compulsory franchise register or specifically prescribed franchise pre-contractual disclosure document. A company’s registration is therefore not a special form of state approval for its franchise offering, nor does it confirm the authority of everyone working for it.

The general rules of the Slovenian Obligations Code (OZ) are relevant to the agreement, representation and powers of attorney. The Companies Act (ZGD-1) is also relevant to the legal status and representation of companies. As a franchise agreement generally includes a licence, the rules governing the form of a licence agreement and the corresponding form of the power of attorney must also be taken into account.

The Obligations Code also addresses situations in which someone exceeds their authority or enters into an agreement without it. Subsequent ratification by the party they purported to represent may be decisive, but a buyer should not assume that the company will necessarily provide the missing approval. The consequences depend on the specific circumstances; such a complication could jeopardise planned payments, a lease or the opening of the business.

If anything is unclear, do not decide for yourself that the agreement is definitely valid or invalid. Before making any further payment, have a lawyer review the position and recommend an appropriate confirmation or a properly signed document.

4. Keep a clear record of the agreement through to signing

Before signing, draw up a list of important agreed departures from the standard terms, such as a fee waiver or additional training. For each one, record who approved it, when and where it is documented. Then ensure that these terms are included in the agreement or a signed annex, rather than only in a message from a sales adviser.

If your contact says they need head office approval, ask for final confirmation before signing. Do not treat their recommendation as an obligation already approved by the franchisor. An electronic signature does not, in itself, remove the need to check authority to act on the company’s behalf: the method of signing and the authority to sign are separate issues.

Keep the final signed version, annexes, checked register documents and any power of attorney. Make sure both parties have signed the same text and that all documents covered by the signatures are attached.

Practical takeaway: before buying a franchise, connect three things: the correct company, an authorised signatory and the precise wording of the agreement. If any link is missing, clarify it before signing or paying.