Buying a franchise: who pays for compulsory outlet refurbishments?

When buying a franchise, the initial fit-out is an obvious cost. Less obvious is the obligation to replace furniture, counters, signage or other equipment later if the brand changes its standards. A consistent look across the franchise network makes commercial sense, but buyers need to know how such changes are required and funded. Before signing, check the rules for future refurbishments, not just the quotes for getting the outlet ready to open.

1. Establish what counts as a compulsory refurbishment

Start by distinguishing routine maintenance from changes to the concept. Repairing a damaged counter is not the same as replacing a serviceable one to match a new brand identity. You should also distinguish between alterations required by law and improvements the franchisor wants as part of the brand’s development. For each category, it should be clear who decides, who carries out the work and who pays.

Review the agreement, its schedules and the sections of the operations manual covering premises and equipment. Pay particular attention to clauses requiring you to comply with ‘current standards’ at all times or to implement future changes at your own expense. Such wording can create a much broader financial commitment than the initial estimate suggests.

Ask the franchisor for written clarification of:

• which refurbishments are already planned and whether they would apply to your outlet;
• whether there is a usual cycle for refreshing the outlet’s appearance and replacing equipment;
• whether a new outlet gets a grace period before its next refurbishment;
• which elements are compulsory and which are merely recommended;
• whether the franchisor can require a refurbishment even when the existing equipment is still serviceable.

If you are buying an existing outlet, also check when it was last refurbished and whether any upgrade requirements have already been issued. Well-maintained premises will not necessarily meet the next version of the standards.

2. Understand where your obligation comes from

Slovenia has no specific franchising legislation, compulsory franchise register or dedicated, legally prescribed pre-contractual disclosure document. A franchise agreement is an ‘innominate contract’ — one not specifically defined as a contract type in legislation. The general rules of the Slovenian Obligations Code (Obligacijski zakonik, OZ), including the principle of good faith and fair dealing, are relevant to its terms and performance.

This means there are no franchise-specific rules automatically setting a refurbishment budget or a notice period for every change to the brand’s visual identity. These safeguards need to be clearly set out in the agreement. Any trade association code of conduct is no substitute for a specific contractual provision.

Ask a lawyer to review, in particular, the scope of the right to change standards unilaterally. A key question is whether a change to the manual can create a new capital expenditure obligation and what limits the agreement places on that power. Do not assume that you can reject every expensive change, or that every franchisor demand is legally unrestricted simply because the franchisor has made it.

If you lease the premises, check separately whether the proposed works require the landlord’s consent. The franchisor’s approval of the plans does not, by itself, replace that consent or any permits required for the type of work involved.

3. Calculate the full cost, not just the new equipment

Prepare a breakdown of expenditure for each announced refurbishment. In addition to equipment, include design, dismantling, removal, delivery, installation, utility connections and any temporary storage. Check whether the quotes include VAT and how its treatment will affect your business’s cash flow.

Assess the impact of closing the outlet separately. Rent, wages and other fixed costs may continue during the works, while revenue falls or stops altogether. Ask whether fixed franchise fees will still be charged during this period and whether the agreement allows temporary alternative operating arrangements.

Also prepare a less favourable scenario: the work takes longer, the contractor discovers another problem or more equipment needs replacing. The aim is not to predict exact future prices, but to establish whether a compulsory refurbishment could jeopardise your ability to meet ongoing payments.

If you plan to use a loan or equipment leasing, check the proposed repayment period and financing terms. A refurbishment requirement does not mean a lender or finance provider will approve the funding. Even a franchisor’s promise to help with financing needs a specific explanation of the scope and conditions of that support.

4. Agree the process before the bill arrives

Rather than relying on a general promise of ‘reasonable costs’, propose clear contractual provisions. These should cover written notice, the contents of the technical specification, time to obtain quotes and the completion deadline. It makes sense to provide different arrangements for minor changes and full refurbishments.

You can negotiate a period after opening during which no cosmetic refurbishment can be required, limits on the frequency of major works, or a spending threshold above which further consent is needed. These are points for negotiation, not automatic statutory rights. Any exceptions for safety or legal requirements should be defined separately.

Also address the possibility of carrying out work in phases, retaining equipment that still meets requirements and resolving disagreements over the scope of the work. If the franchisor promises to contribute to the cost, record the amount or calculation method, the conditions and the payment deadline.

Practical takeaway: before signing, you should be able to answer four questions: who can require a refurbishment, when you must complete it, who pays, and what happens if you cannot fund it within the specified timeframe.