Exiting a franchise: removing the brand and winding down operations

When setting up your first franchise, it is easy to focus mainly on opening. But a franchise network also needs a workable exit procedure: what happens to the premises, online profiles, stock and outstanding orders when the relationship ends? If you are preparing an existing business for expansion in Slovenia, settle these questions before signing your first agreement. This protects your brand identity and reduces the risk of customers continuing to associate a former franchisee with your business.

1. Separate the grounds for termination from the exit procedure

The agreement should address when and why the relationship ends separately from what both parties must then do. Expiry of the agreed term, early termination by mutual agreement and termination for breach are different situations. Nevertheless, each requires a clear exit plan.

Slovenia has no dedicated franchising act, and franchise agreements are not specifically regulated as a distinct type of contract. The legal foundation is provided by the general rules of the Slovenian Code of Obligations, particularly those governing performance of obligations, termination of contractual relationships and liability for breaches. Freedom of contract is limited by mandatory legal provisions and moral principles. The Industrial Property Act is also relevant to trade mark use, while the Trade Secrets Act applies to confidential know-how.

There is therefore no special statutory procedure for ‘deregistering a franchise’ that can replace a contractual exit plan. The parties may agree to terminate early, but they must also address the consequences. Given the licensing elements, for which the Code of Obligations requires written form, document the key arrangements in writing.

Specify the date on which the right to use the brand ends, the last day for accepting new orders under the shared identity, and deadlines for individual exit tasks. Ask a lawyer to check that these deadlines are consistent with the basis for termination and any remaining contractual obligations.

2. List every physical and digital use of the brand

Removing the external sign is not enough. Before your first expansion, draw up a list of every place where the franchisee will use your brand identity. Then incorporate it into the exit checklist.

This will usually cover:

• external and internal signage, window displays and vehicle branding;
• uniforms, packaging, price lists and promotional materials;
• websites, domain names, email addresses and signatures;
• profiles on social media, online maps and ordering platforms;
• templates for quotations, invoices and other documents.

For each item, specify the owner, the person responsible for managing access, the action required and evidence of completion. Some items will need to be removed, others returned, and others renamed or transferred where contracts and the service provider’s rules allow.

Establish ownership of digital accounts when setting up the outlet. If an employee creates a local profile using a personal email address, ending the relationship will be more difficult. Equally, the franchisor must not simply take over the franchisee’s account or access it without a proper basis.

Also agree who will pay for removing signage and obtain any necessary consent from the premises owner. Verify the final position through photographs, checks of public profiles and a signed completion record, rather than relying solely on a statement that ‘everything has been sorted’.

3. Agree in advance how stock and orders will be handled

Stock can quickly become a source of dispute when the relationship ends. The franchisee may have paid for it, but that does not in itself confer an unlimited right to continue trading under your brand. Nor does the franchisor have an automatic obligation to buy back all remaining stock unless this has been agreed.

In the agreement, distinguish between ordinary goods, branded products, branded packaging and equipment. If you provide for a buy-back, specify requirements concerning condition, remaining shelf life, proof of purchase, valuation and transport. If you allow a limited sell-off period, ask a lawyer to review its scope and the permitted use of the brand. Rules governing the sale of genuine goods should not be replaced with a blanket prohibition without legal review.

Prepare a separate list of outstanding orders, advance payments received, bookings and unused vouchers. For each category, specify who will notify the customer, who will fulfil the obligation and how any refunds will be handled. An internal agreement between the parties does not, in itself, alter customers’ rights or change the party with whom they have contracted.

For example, an outlet stops using the brand on Friday but already has confirmed orders for the following week. The plan must state whether the outlet can lawfully fulfil them, whether they will be transferred elsewhere with customers’ consent, or how they will be cancelled and advance payments refunded or otherwise settled.

4. Confirm completion with a written record and final account

Each party should appoint a contact person to manage the exit. They should coordinate the stocktake, the return of loaned equipment, the final calculation of fees, and the return or deletion of materials where required. Trade secrets remain protected after the relationship ends, provided the statutory conditions are met.

Do not require indiscriminate deletion of all documents. The former franchisee may need to retain some to comply with legal obligations or assert legal rights. Distinguish operating instructions and confidential content from accounting records and documentation subject to retention requirements.

The final completion record should list completed tasks, outstanding items, responsible individuals and remaining deadlines. It should also state clearly whether signing merely confirms the recorded position or includes settlement of specified claims.

Practical takeaway: before your first expansion, run a tabletop exercise to test the exit process. If, for every branded item, order, stockholding and access permission, you know who will do what and on what basis, you have a more useful plan than a general requirement for the franchisee to ‘stop using the franchise’ when the relationship ends.