Protecting Trade Secrets Before Expanding Your Franchise in Slovenia

When expanding an existing business into a franchise network, you are sharing more than just a name with your partners: you are also passing on the know-how that makes your business work. Recipes, purchasing terms, costings and procedures can quickly lose their value if they become widely available. The aim is therefore not to keep everything secret, but to identify which know-how needs protection, who may use it and how you will demonstrate that you have taken appropriate steps to safeguard it.

1. Distinguish trade secrets from ordinary information

The main legislation is Slovenia’s Trade Secrets Act (ZPosS), adopted in 2019. Not every piece of information a business labels confidential qualifies as a trade secret. It must meet the statutory conditions: the information must not be generally known or readily accessible to people in the circles that normally deal with that type of information; it must have commercial value because it is secret; and its holder must have taken reasonable steps to keep it secret.

For an existing business, start by drawing up an inventory of your know-how. For each category, record its value, how accessible it has been to date and who uses it. In a food service franchise network, a precise production recipe may qualify for protection, but a menu displayed by the entrance will not.

The following classification is useful:

• Public information: your offering, published prices and a general description of the concept.
• Internal information: day-to-day organisational instructions that are not intended for the public.
• Trade secrets: non-public costings, specialised technical processes or negotiated purchasing terms, provided they meet the statutory conditions.

Do not automatically label everything a trade secret. Among other things, the Act excludes information that is public by law, as well as information about breaches of the law or good business practice.

2. Establish ownership and permitted use of know-how

Before sharing know-how with partners, check where it comes from. Did your team develop the process? Was the costing tool created by an external consultant? Does the supplier’s contract even allow you to disclose its terms to franchisees? Having access to a document does not necessarily give you the right to share it with others.

Create a register recording the source, the person responsible and any restrictions on use for each important item. Where external contractors are involved, check the contractual provisions on rights and confidentiality. If the material contains personal data, you must also take separate account of the General Data Protection Regulation (GDPR) and Slovenia’s Personal Data Protection Act (ZVOP-2); labelling information a trade secret does not provide a legal basis for sharing personal data.

Slovenia has neither a dedicated law comprehensively governing franchise agreements nor a specific mandatory franchise register. Contractual relationships are governed primarily by the Obligations Code, while trade secret protection is governed by ZPosS. Depending on the nature of the arrangement, intellectual property and competition rules also apply. Freedom of contract therefore does not mean that every restriction on the use of know-how is permissible.

3. Make confidentiality arrangements specific, rather than relying on labels

A confidentiality agreement should define the categories of information being protected and the permitted purpose of use. A general statement that ‘everything is confidential’ does not explain whether a partner may send costings to an accountant or show a recipe to a shift manager.

Work with a legal adviser to address, in particular:

• who may receive the information and on what terms;
• use solely for agreed tasks within the franchise network;
• safeguards covering employees, advisers and other people involved;
• procedures for mandatory disclosure to a competent authority;
• notification if documents are lost or unauthorised access occurs;
• the duration of obligations and the return or deletion of copies, taking statutory retention requirements into account.

Include the usual exceptions, such as information that has lawfully entered the public domain or that the recipient can demonstrate they developed independently. Confidentiality is not a substitute for a non-compete clause and must not be used to prevent legally protected disclosures.

When assessing reasonable safeguards, ZPosS places importance on identifying trade secrets in writing and informing those who come into contact with them. However, a label and a signature do not, by themselves, replace the other conditions for statutory protection.

4. Grant access on a need-to-know basis

A partner needs enough know-how to operate successfully, but not necessarily access to all your business data. An outlet manager may need the standard procedure for preparing a product, but not the franchisor’s entire purchasing strategy.

Store documents in a properly managed environment with individual user accounts. Set permissions for viewing, editing and downloading, and enable multi-factor authentication where available. Avoid shared passwords and sending entire collections of documents to personal email addresses.

Every important document should have a designated person responsible for it, a version number and a clear confidentiality label. Review access rights promptly when an employee or external contractor changes. During training, explain specific risks, such as photographing a recipe, sharing a screen or uploading costings to unapproved online tools.

5. Prepare a procedure for potential disclosures

Designate a contact person to receive reports, restrict further access and coordinate the response. If an incident occurs, preserve access logs, relevant messages and document versions. Gather evidence lawfully; ill-considered deletion can make it harder to establish what happened.

Ask a legal adviser to assess the options for seeking an order to stop the infringement, interim court relief or damages. If personal data is affected, separately check the obligations relating to a personal data breach. Contractual provisions do not automatically guarantee success: the facts, evidence and safeguards actually in place will all matter.

Practical takeaway: before sharing know-how for the first time, draw up an inventory of trade secrets, check usage rights, put confidentiality arrangements in place and test access permissions. Good protection enables cooperation within a franchise network rather than getting in its way.