Buying a franchise: plan your exit before you sign

Buying a franchise means joining a franchise network, but you should also be clear from the outset about how you can leave it. Contract expiry, the sale of the business or early termination can leave you with debts, lease commitments and equipment you can no longer use. Planning your exit is therefore not something to leave until the end of the relationship: it is an important part of assessing whether your chosen franchise is right for you financially and contractually.

1. Align the franchise term, lease and financing

Start by putting the franchise agreement, premises lease, loan and equipment lease on a single timeline. Mark the expiry dates, notice periods and deadlines for exercising renewal rights. If your right to use the brand ends before your lease or equipment repayments do, you may still have bills to pay even though you can no longer trade under that brand.

Renewal is not an automatic right. Check whether the agreement gives you a right to renew if you meet certain conditions, or merely an opportunity to negotiate a new deal. It is particularly important to establish whether the franchisor can require a further initial fee, refurbishment of the premises or acceptance of different contractual terms on renewal.

Prepare two financial scenarios: one with renewal and one without. In the second, exclude revenue after the agreement expires but include all remaining liabilities. If you can only recoup your investment through a renewal that is not guaranteed, this represents a significant risk when buying the franchise.

Also try to negotiate aligned exit options for the premises lease and other related agreements. Ending the franchise agreement does not generally release you from these commitments.

2. Distinguish between expiry, termination on notice and termination for breach

Slovenia has no dedicated law comprehensively regulating franchising, no compulsory franchise register and no legally prescribed standard disclosure document for franchise purchases. This does not mean the relationship is unregulated. The Slovenian Obligations Code (OZ) is central to contractual obligations, including the principle of good faith and fair dealing and the rules on non-performance and liability for damages.

Franchisees generally enter into agreements as businesses, so do not assume you have a consumer right to withdraw simply because you are buying a franchise. Check the agreement specifically for any cooling-off period or right to exit without giving a reason.

Review the following points with a lawyer:

• which breaches allow early termination;
• whether the party in breach must first receive a written warning;
• whether there is a reasonable period in which to remedy the breach;
• how warnings and termination notices must be served;
• what rights you have if the franchisor fails to meet its obligations.

Also distinguish between the obligation to pay outstanding invoices, any contractual penalty and damages. A claim for future fees is not automatically justified simply because the other party makes it. Its legal basis, scope and enforceability need to be assessed.

3. Check whether you can sell the business

Selling an operating outlet may be a better option than closing it, but buying its equipment or a shareholding does not necessarily give the buyer the right to continue using the brand. The agreement may require the franchisor's prior consent, vetting of the prospective franchisee or a new agreement.

Agree on a clear transfer procedure: who receives the proposed offer, what criteria the buyer must meet, who makes the decision and within what timeframe. Also check whether the franchisor has a right of first refusal, whether a transfer fee applies and whether your successor must complete training.

Pay particular attention to personal guarantees. Selling the business does not in itself release you from a personal guarantee. If you have personally guaranteed a loan, lease or other obligations, you will need an appropriate written release from the creditor.

Check the provisions governing changes in company ownership as well. These may require consent even where the contracting party remains the same company but its owner changes. Treat the franchise transfer and the company sale as connected matters, rather than two separate processes.

4. Estimate the costs after termination

Prepare a separate budget for closing the outlet or converting it to another business. Include removing signage, work on the premises, cancelling subscriptions, remaining finance instalments and any obligations to employees. Slovenia's Employment Relationships Act (ZDR-1) is relevant here: ending the franchise agreement does not in itself end employment contracts.

For stock and equipment, check whether there is a buy-back obligation, who sets the price and who pays for collection. Do not assume the franchisor will take back everything you were required to buy when you opened.

Examine any post-termination non-compete clause too. Its enforceability depends not just on your signature, but also on its terms and competition law. Relevant legislation includes Slovenia's Prevention of Restriction of Competition Act (ZPOmK-2) and, where applicable, EU rules, including Commission Regulation (EU) 2022/720 on vertical agreements. Have a specialist review the restriction's duration, geographical reach and the activities it covers.

Also make arrangements for returning manuals, ending access to systems and handling customer data. Personal data cannot simply be transferred to a buyer or retained at will; you must comply with the General Data Protection Regulation and Slovenia's Personal Data Protection Act (ZVOP-2).

Practical takeaway: before signing, prepare a one-page exit plan setting out when you can leave, who you can sell to, which obligations will remain and how much money you will need. If you cannot put the key answers clearly in writing, resolve the contractual issues before committing your funds.