Buying a franchise: protect your opening date

You may have signed a franchise agreement without yet being ready to open. While you wait for equipment, building work to finish or formalities to be completed, costs can mount up without any income. When joining a franchise network, it is worth agreeing more than a target date: establish who is responsible for each milestone, when financial obligations begin and what happens if opening is delayed.

1. Turn the target date into a verifiable schedule

An ‘estimated opening date’ is not necessarily a contractual commitment. Before buying, ask for a schedule that distinguishes between indicative targets and obligations undertaken by each party. Simply naming an opening day is not enough: you need to identify what must happen beforehand.

Prepare a table with four columns: milestone, responsible party, date and evidence of completion. Depending on the business, it could include:

• Delivery of the technical specifications needed to prepare the premises.
• Approval of the plans by the franchisor, where required.
• Ordering and receiving equipment and initial stock.
• Completion of the administrative procedures needed to open legally.
• Pre-opening training for everyone required to complete it.
• A final check that the business is ready to operate.

Distinguish between the brand’s internal approval and requirements imposed by the public authorities. The former does not replace the latter. Nor should you assume that every business needs the same type of licence or administrative procedure.

Ask which tasks depend on others. If you cannot order equipment until the franchisor supplies a specification, that dependency should be documented. This will make it easier to establish why a delay occurred.

2. Separate signing, payments and the start of the contract term

Signing the agreement, taking possession of the premises and opening to the public are separate events. Check what consequences are linked to each. The contract term may start running from signature, even if the premises take some time to generate income.

Ask for written answers to these questions:

• From what date does the initial franchise term run?
• When do recurring payments and any minimum fees start to accrue?
• Are any services charged for during the preparation stage?
• Do performance targets apply from signature or from the actual opening date?
• What document confirms that opening has taken place?

Payments are not all automatically suspended simply because you have not opened. The position depends on the agreement and the legal circumstances of the case. Negotiate explicitly which obligations will be deferred and which will remain in force.

One possible solution is to link certain payments and the start of the operating term to the actual opening date, subject to a deadline and clear conditions. This is not an automatic right for the buyer, but a proposal that must be incorporated into the agreement. Do not settle for a verbal promise that ‘we’ll adjust it later’.

3. Agree consequences according to the cause of the delay

A delay attributable to the franchisee, a breach by the franchisor and an obstacle beyond either party’s control should not all be treated alike. Ask for the agreement to set out how an issue must be reported, what supporting documents are required and how long the parties have to remedy it.

For the franchisor’s commitments, specify deliverables and dates. If it must supply items essential to opening, negotiate what happens if they arrive late: rescheduling, deferral of certain fees or other measures agreed by both parties.

For your own obligations, check whether there are penalties for delay, whether prior notice is required and whether you have an opportunity to remedy the problem. Also review how supplier delays are handled: a supplier being recommended by the brand does not, in itself, make the franchisor responsible for all of that supplier’s failures.

For administrative obstacles or exceptional circumstances, avoid wording that purports to settle every possible scenario. Not every delay amounts to force majeure. Define a review procedure and a final deadline for waiting, at which point the parties can determine whether to continue, renegotiate or end the relationship.

If an exit is agreed, specify how payments already made, equipment ordered and costs already committed will be treated. A clause allowing termination without clarifying its financial consequences may leave the main problem unresolved.

4. Review these conditions before committing money

In Spain, the specific legal framework includes Article 62 of Law 7/1996 on the Regulation of Retail Trade and Royal Decree 201/2010. The latter requires written, truthful and non-misleading pre-contractual information to be provided at least twenty working days before the contract or preliminary agreement is signed, or before the prospective franchisee makes any payment to the franchisor.

Among other matters, this information must cover start-up investment and costs, and the essential terms of the agreement. However, the legislation does not prescribe a universal opening timetable or automatic compensation for every delay. These issues require a review of the agreement and the general rules on obligations and breach under Spain’s Civil Code.

Give your lawyer the schedule, the financial proposal and all appendices so they can check for inconsistencies.

Practical takeaway: before signing, put in writing who does what, when you start paying and what options you have if opening is delayed.