Buying a franchise: who bears the cost of a delayed opening?

There are several steps between signing a franchise agreement and making your first sale, and not all of them are within your control. Equipment may arrive late, training may not yet have taken place, or the franchisor may not have confirmed that the premises are ready. Meanwhile, you may already be paying rent, wages and franchise fees. Before joining a franchise network, check in particular how the agreement allocates the consequences of a delayed opening.

1. Break the opening schedule down into verifiable milestones

A promise that you will open ‘soon after signing’ is not a workable plan. Ask for a timeline that distinguishes the target opening date from contractually binding deadlines. For each step, identify who is responsible, what prerequisites must be met and what evidence will confirm completion.

Depending on the business, the timeline should include:

• approval of the premises layout and fit-out plan;
• ordering, delivery and installation of equipment;
• meeting the requirements for operating the business;
• initial training for the owner and staff;
• setting up IT and sales systems;
• a final inspection and written approval to open.

Pay particular attention to dependencies. If you can only order equipment once the plans have been approved, there must also be a deadline for that approval. Otherwise, you could be held responsible for the final opening date without controlling when the process starts.

Also agree who will manage the shared timeline and how changes will be approved. A verbal agreement at a meeting should not be the only record of a revised deadline.

2. Separate the cause of a delay from its financial consequences

Not every delay amounts to a breach by the franchisor. It may be caused by the franchisee, a contractor, a supplier or circumstances beyond either party’s control. The agreement should therefore do more than simply state that ‘the franchisee bears all opening costs’.

For each significant scenario, ask: who must take action, who pays the additional costs and which deadlines move? If the franchisor postpones compulsory training, check how travel tickets already purchased, accommodation and staff wages will be handled. If a contractor you chose causes the delay, responsibility may be allocated differently.

Even where you are required to use a particular supplier, do not assume that the franchisor is automatically liable for that supplier’s delay. Check who is placing the order, what the supply contract says and whether you may use an alternative solution if there is a delay.

Draw up a list of the costs incurred each week without sales. Include rent, wages, financing, storage and any repeat promotional activity. This is not an estimate of damages, but a basis for negotiating who bears those costs.

3. Align the start of fee payments with the agreement’s term

Check whether monthly fees start accruing on signing, on a specified calendar date or when the business actually opens. A turnover-based fee and a minimum fixed fee do not have the same effect: the latter may become payable even without sales, if the agreement provides for this.

Also ask when the contractual term begins. If it starts on signing, a delay reduces the time available to trade and recover your investment. Postponing the opening does not, in itself, extend the agreement.

Propose explicit provisions setting out when a delay will defer the start of particular payments and whether the agreement’s expiry date will move. Distinguish between delays for which you are responsible and those for which the other party is responsible.

Pay particular attention to a soft opening. If even limited trading triggers all fees, this must be clear in advance. Define what counts as opening and which written record or other evidence will confirm the date.

4. Build safeguards into an agreement governed by Slovenian law

Slovenia has no dedicated franchising law, compulsory franchise register or specific statutory pre-contractual disclosure document. Do not therefore expect a special franchise rule to determine compensation for a late opening.

If the agreement is governed by Slovenian law, the key legislation is the Slovenian Obligations Code (Obligacijski zakonik, OZ). Its general rules on performing obligations, delay, liability for damages and termination of contracts are relevant, as is the principle of good faith and fair dealing. Your specific rights depend on the agreement and the circumstances; not every delay automatically entitles you to a refund of all payments.

Work with a lawyer to establish a duty to give timely notice of a delay, a deadline for resolving the problem and a longstop date after which you may terminate the agreement on agreed conditions. Also specify what happens to the initial franchise fee, equipment already ordered and services already provided. Any contractual penalty should be legally appropriate and drafted for a specific non-monetary obligation, rather than simply added as a general threat.

Check the force majeure provisions too: what they cover, what notice they require and what happens if disruption continues for an extended period.

5. Check readiness before committing to major expenditure

Before ordering equipment, recruiting staff or launching an opening campaign, jointly review which milestones have been reached. Ask for written details of outstanding tasks and an updated plan, rather than just assurances that everything will be ready on time.

Practical takeaway: before signing, agree on three things: who is responsible for delivering each milestone, who bears the consequences of delay and when you can stop the project. An opening date without these answers is not enough to protect your investment.