Franchise fees in Slovenia: how to set them

A successful existing business does not, on its own, tell you how much an independent franchisee can afford to pay. When building a franchise network in Slovenia, fees must fund genuine support while leaving franchisees enough to pay for work, replace equipment and grow the business. So rather than starting your fee structure by comparing competitors, begin by assessing the economics for both parties.

1. First, work out what a unit can afford

Prepare a monthly financial model for a prospective franchisee. Base it on verifiable results from your existing business, but strip out advantages that a new partner will not automatically enjoy: a favourable long-standing lease, unpaid work by the founder or a supplier discount linked to larger order volumes.

Include the cost of goods or materials, employees, the owner's work valued at market rates, rent, energy, insurance, accountancy and local advertising. Plan separately for working capital, loan repayments and future equipment replacement. A profit on paper does not necessarily mean there will be enough cash in the bank to meet every obligation.

Test the model at expected turnover and under a less favourable scenario. Rather than choosing an arbitrary percentage decline, use seasonal fluctuations you have observed in your own business. Also assess the effects of a slower start or higher labour costs.

A fee is sustainable only if paying it still leaves the franchisee with a worthwhile financial return. If the figures work only when the business operates continuously at full capacity, the problem may lie in the design of the offering rather than the level of the fee.

2. Separate the initial fee from ongoing support

The initial fee should have a clear commercial rationale. List what the franchisee receives when joining: initial training, help with site selection, preparations for opening, system installation and launch support. Estimate staff time, external contractors, travel and direct costs.

The initial fee may also reflect the value of access to an established business concept. It need not equal the cost of onboarding, but it should not conceal the fact that the franchisor's ongoing operations lack a sustainable source of revenue.

Link the ongoing royalty to continuing commitments: advice, development of the offering, training, quality checks and maintenance of shared tools. Common options include:

• A percentage of turnover: payments follow sales volumes, but the calculation base must be precisely defined.
• A fixed amount: this makes planning easier but places a greater burden on the franchisee in quieter months.
• A combination: this brings together a base amount and a variable element, so test it particularly carefully at lower turnover levels.

Do not choose a model simply because another franchise network uses it. Prepare a franchisor budget too: how much high-quality support can the team provide, and what will it cost to expand that capacity as new franchisees join?

3. Define the calculation base without grey areas

The phrase “royalty on turnover” is not precise enough. Specify in the agreement whether the calculation is based on sales excluding VAT, and how discounts, returns, cancellations, gift vouchers and sales through online platforms are treated. For platform sales, state whether the full sales value counts or the amount remaining after the platform's commission has been deducted.

Also agree which unit is credited with an online order when the customer orders centrally but collects the goods from a franchisee. Unclear rules should not inadvertently result in the same sale being counted twice in the fee calculation.

Prepare a sample calculation for a hypothetical month and check it with an accountant, from the sales report through to the invoice. Do not present illustrative figures as an earnings forecast.

The agreement should specify the reporting period, payment due dates, how errors are corrected and a proportionate procedure for verifying data. Limit access to business reports to the information needed and establish confidentiality safeguards. Describe any index-linked adjustments using a clear benchmark, date and notification procedure, rather than an unrestricted right to impose unilateral increases.

4. Be transparent about the marketing contribution

If you charge a contribution towards shared marketing in addition to the royalty, explain what it is for. Distinguish network-wide campaigns from local advertising funded by the franchisee and from promotion aimed at recruiting new franchisees.

Set out in advance who decides how the money is spent, which types of costs it covers and how often franchisees receive a report. If contributions also fund administrative work, this should be expressly agreed. Specify how unspent funds will be handled too.

Equal contributions do not necessarily generate equal numbers of enquiries at every location. It is better to promise a clear planning and reporting process than sales results you cannot guarantee. Transparency builds trust across the franchise network.

5. Align your fee structure with Slovenia's legal framework

Slovenia has neither a dedicated law comprehensively regulating franchising nor a statutory schedule of franchise fees. Franchise agreements are not specifically codified; they are governed primarily by the general rules of the Slovenian Obligations Code, including the principles of good faith and fair dealing, and freedom of contract within the limits of mandatory law.

The Prevention of Restriction of Competition Act (ZPOmK-2) is also relevant, as are EU competition rules where the conditions for their application are met. An agreement on your royalty does not give you permission to set minimum resale prices for franchisees. Such restrictions require a separate legal assessment.

Check the tax treatment of fees under the Value Added Tax Act (ZDDV-1), particularly for cross-border arrangements. Protect confidential fee-calculation data appropriately, taking account of the Trade Secrets Act as well. Before signing, have a lawyer and an accountant jointly check that the fee schedule, calculation rules and agreement are consistent and legally compliant.

Practical takeaway: prepare three connected documents: the franchisee's financial model, the support budget and a sample monthly fee calculation. If there is no clear link between them, your fees are not yet ready to be offered to your first franchisee.