Buying a franchise: keep the business running if you fall ill

What happens to your franchise if you cannot work for an extended period? A franchise network combines shared ways of working with your responsibilities as an independent business owner. If the business model depends on your personal presence, illness can create both operational problems and contractual risks. Before you buy, you therefore need to know who can stand in for you, which obligations will continue to apply and what your absence will cost.

Identify the requirements for your personal involvement

Start by distinguishing between the company's obligations and requirements that apply to you personally. A limited company may be the franchisee while the agreement still requires a named owner to manage the business. Having capable employees does not necessarily mean the owner can hand over operations without approval.

Pay particular attention to wording about active ownership, operational responsibility, attendance and the designated business manager. Also check whether the same requirements appear in appendices or other documents referred to in the agreement.

Ask the franchisor to answer the following questions:

• Must you work in the outlet yourself, and if so, to what extent?
• Can an employed manager handle day-to-day operations?
• When must sickness absence be reported, and to whom?
• Is there a time limit on how long a stand-in manager can be used?
• Can an extended absence be grounds for termination even if the business is running well?

Ask for specific answers covering both short and long absences. A general assurance that the network ‘usually sorts these things out’ does not establish what rights your company will actually have. The distinction between a duty to notify and a requirement for prior approval is particularly important.

Agree how a stand-in manager will be approved

A workable contingency plan needs to be ready when an absence begins, not only after weeks of negotiations. Ask what qualifications and skills a temporary manager must have and how the franchisor assesses candidates.

Requirements for knowledge of the franchise concept and relevant experience may be justified. But check whether the process is clear: who makes the decision, what supporting information is needed and when should you receive a response? Ask for objective criteria and an agreed response time rather than an open-ended approval requirement.

Try to agree a contingency arrangement before you start trading. For example, a trained deputy could be allowed to take over temporarily once the franchisor has been notified, while a longer absence would require separate approval. This is a proposal for negotiation, not a right you automatically acquire when you buy a franchise.

Also clarify what the stand-in manager is authorised to do. They may need to order goods, handle customer enquiries and represent the company in dealings with the franchisor. Approval from the network does not replace the company's own decisions on delegated authority or any powers of attorney that may be needed.

Finally, ask whether the franchisor can help by providing a temporary manager. If so, you need to specify availability, cost and responsibilities. Distinguish a binding commitment from assistance offered only when resources are available.

Calculate the cost of absence without assuming fees will be waived

Do not assume that franchise fees or other payments will be suspended if you fall ill. Check what the agreement says about continued trading, reduced opening hours and temporary closure. In particular, establish whether minimum fees or other fixed payments remain payable when sales fall.

Prepare a separate financial forecast for three absence scenarios: operations continue with a stand-in manager, the business runs at reduced capacity, or the outlet has to close temporarily. Use the business's own costs and estimated revenue rather than generic figures.

Include:

• the stand-in manager's salary or fee and any induction costs,
• fixed costs and fees payable under the agreement,
• the impact of lower sales,
• any charges for assistance from the franchisor,
• how long the company's available cash will last.

If you need concessions to make the figures work, negotiate them before entering into the agreement. Specify when each concession applies, how long it lasts and whether payments are waived or merely deferred. A deferred fee is still a future cash outflow.

Anchor the contingency plan in the agreement and Swedish law

Sweden has no comprehensive law governing every aspect of the franchise relationship. However, the Act (2006:484) on Franchisors' Duty to Provide Information applies. It requires the franchisor to provide clear, understandable written information about the meaning of the agreement and other relevant matters well before the agreement is concluded. The minimum disclosure requirements include financial terms, termination provisions and the financial consequences of termination.

A personal involvement requirement that could have significant financial consequences if you fall ill therefore needs attention during the pre-purchase review. However, the disclosure legislation does not itself give you an automatic right to a stand-in manager, a fee waiver or a suspension of the agreement. Other legislation relevant to the contractual relationship includes the Swedish Contracts Act and the Act on Contract Terms between Businesses.

Have a solicitor or other legal adviser with franchise expertise review how the absence provisions interact with breach of contract and termination clauses. In particular, ask what opportunities you have to arrange a stand-in manager before the franchisor can take action.

Practical takeaway: Do not buy on the assumption that sickness absence can be sorted out informally. Secure a workable process for appointing a stand-in manager, calculate the cost and put any agreed exceptions in writing before signing.