Franchising can be an attractive way to enter the business world. A prospective franchisee gains access to an organised business system, a trademark, know-how, operating procedures and, often, an already recognisable network.
Behind every franchise opportunity, however, there is a contract. And that contract determines almost every critical issue: financial obligations, duration of the relationship, territory, supply obligations, operating standards, post-termination restrictions and the consequences of termination.
Many prospective franchisees sign without full legal review, assuming that a “standard” agreement cannot be changed. In practice, even small drafting details can significantly affect the investment, profitability and business freedom of the franchisee for years.
What Is a Franchise Agreement and What Does It Regulate?
A franchise agreement is the contract between the franchisor and the franchisee.
The franchisor grants the franchisee the right to use a specific business system, trademark, trade name, know-how and operating methods. The franchisee undertakes to operate the business in accordance with the system and to pay the agreed financial consideration.
The agreement usually regulates, among other things:
The right to use the brand and distinctive signs.
The transfer of know-how and operating instructions.
The franchisee’s financial obligations.
The territory and any exclusivity.
Training and support obligations.
Supply obligations for products or services.
Duration, renewal and termination.
Non-compete and confidentiality clauses.
Greece does not have a specific standalone law comprehensively regulating franchising. Depending on the case, franchise agreements are governed by the general provisions of the Greek Civil Code, commercial law, unfair competition law, trademark and intellectual property law, as well as EU and Greek competition law. The rules on vertical agreements, including Regulation (EU) 2022/720, are particularly important.
Precisely because there is no complete specific statutory framework, the quality and accuracy of the contract are crucial.
The 8 Critical Points You Should Check
- Entry fee and royalties
The initial entry fee — franchise fee — is usually the one-off amount paid by the franchisee to join the network and use the franchise system.
Royalties are the periodic payments made during the term of the agreement. They may be calculated as a percentage of turnover, as a fixed amount or through a mixed system.
Before signing, you should check:
The exact amount of the franchise fee.
Whether it is refundable in any circumstances or definitively non-refundable.
How royalties are calculated.
Whether they are calculated on gross or net turnover.
Whether there is a minimum guaranteed amount regardless of revenue.
Whether there are additional charges for marketing, training, software, technical support or renewal.
A business model may appear viable in the initial presentation, but become financially burdensome once all periodic costs are included.
- Territorial exclusivity
Territorial exclusivity is one of the most important points in a franchise agreement. It should not, however, be assumed.
If an exclusive territory is granted, it must be clearly defined. A general reference to an “area of operation” or “reasonable commercial zone” is not enough. The agreement should specify whether exclusivity refers to a municipality, region, radius, specific commercial location or another clear criterion.
Particular attention should be paid to:
Whether the franchisor may open another outlet in the same or neighbouring area.
Whether the franchisor may sell through an e-shop within the franchisee’s territory.
Whether sales through marketplaces or third-party partners are allowed.
Whether there are exceptions for corporate stores, key accounts, wholesale or special distribution channels.
Without clear wording, territorial exclusivity may prove far more limited than the franchisee understood during negotiations.
- Duration and renewal rights
Franchise agreements are often concluded for several years, because the franchisee is required to make a significant initial investment in premises, equipment, staff, training and operational adaptation.
The duration of the agreement should be assessed in relation to the amount of the investment and the reasonable time needed for amortisation. A short-term agreement with a high initial cost may create serious business risk.
You should check:
The initial term.
Whether there is a renewal right.
Whether renewal is automatic or requires a new agreement.
Whether the franchisor may impose new financial or operational terms upon renewal.
What happens if the agreement is not renewed.
Whether the franchisee is compensated for investments that have not been amortised.
Renewal should not be left to vague wording. The franchisee must know whether there is a real possibility of continuing the business.
- Termination clauses
Termination provisions are among the most critical and often most dangerous parts of the agreement.
It must be clear under what conditions each party may terminate the agreement, whether notice is required, whether there is a cure period and what the consequences of termination are.
Particular attention should be paid to clauses allowing the franchisor to terminate for vague or overly broad reasons. Terms such as “breach of network policy” or “serious reason at the franchisor’s discretion” should be specified, so that they do not create excessive uncertainty for the franchisee.
You should also examine:
Whether immediate termination is permitted.
Which breaches are considered material.
Whether the franchisee has an opportunity to remedy the breach before termination.
Whether penalties or compensation clauses apply.
What happens to stock, equipment, signage, customer data and accounts after termination.
Termination is not just the formal end of the relationship. It may directly affect the economic viability of the business.
- Exclusive supply obligations
Many franchise agreements require the franchisee to purchase products, raw materials, equipment, software or services exclusively from the franchisor or from approved suppliers.
Such clauses may be operationally necessary to ensure uniformity and quality within the network. They may also significantly affect the franchisee’s operating costs and profit margin.
You should check:
Which categories of products or services are covered by the exclusive supply obligation.
Whether prices are competitive or may be changed unilaterally.
Whether minimum purchase quantities apply.
Whether alternative suppliers are allowed if they meet specific specifications.
Whether the supply terms comply with competition law.
Exclusive supply is not necessarily problematic, but it must be clear, reasonable and compatible with the overall economic model of the relationship.
- Training and support
Training and support are core elements of franchising. The franchisee does not merely acquire the right to use a brand; they must receive know-how, instructions and operational support enabling them to apply the system.
The agreement should clearly define:
The type and duration of initial training.
Who will be trained.
Whether support is provided during the opening of the outlet.
Whether ongoing training is provided after launch.
Who bears travel, accommodation or additional training costs.
What technical, commercial or operational support is provided in practice.
General references to “continuous support” or “full know-how” are not enough. The franchisee must know exactly what they are entitled to receive.
- Transfer rights
The ability to transfer the business is critical to the value of the investment. If the franchisee wishes to sell the business, exit the network or transfer shares in the company operating the franchise, the restrictions must be known in advance.
You should check:
Whether prior approval from the franchisor is required.
On what criteria the franchisor may approve or reject the new franchisee.
Whether the franchisor has a right of first refusal or option right.
Whether a transfer fee applies.
Whether the transfer depends on signing a new agreement on different terms.
What happens in the event of death, incapacity or change of control of the franchisee’s company.
Without clear transfer terms, the franchisee may discover that the investment is far more difficult to realise than initially expected.
- Post-termination non-compete clause
Non-compete clauses are common in franchise agreements, especially to protect the franchisor’s know-how, network and commercial identity.
However, such clauses must be carefully reviewed. A non-compete clause is not valid or enforceable merely because it appears in the contract.
After termination, the clause must be limited and proportionate. Under EU competition law, particular importance is attached to its duration, geographical scope, the activities prohibited and the need to protect the transferred know-how.
You should check:
How long the restriction applies.
The geographical area covered.
Which activities are considered competing.
Whether the clause is necessary to protect know-how.
Whether it is linked to the premises from which the franchisee operated.
Overly broad non-compete clauses can create serious restrictions for the franchisee and may be challenged as to their validity or enforceability.
The Importance of Pre-Contractual Information
In some countries, franchisors are legally required to provide prospective franchisees with a detailed disclosure document before signing. Greece does not have an equivalent comprehensive statutory disclosure document requirement as found in other jurisdictions.
This does not mean that pre-contractual information is irrelevant. On the contrary, under Greek law, good faith, fair dealing, accuracy of information provided during negotiations and avoidance of misleading presentations are particularly important.
Before signing, a prospective franchisee should request:
A detailed description of the franchise system.
The financial model and key viability assumptions.
A full breakdown of the initial investment.
An estimate of recurring costs and obligations.
Information on existing outlets in the network.
A description of training, support and marketing.
The full draft agreement and its annexes.
The absence of meaningful pre-contractual information does not automatically invalidate the agreement. However, it is a serious warning sign and may have legal significance depending on the facts, especially where misleading information, concealment of essential elements or bad-faith conduct can be established.
Franchisor or Franchisee: Who Benefits from a Good Agreement?
A good franchise agreement does not protect only one side. It protects the viability of the relationship.
The franchisor needs an agreement that protects the brand, know-how, network uniformity and quality of products or services.
The franchisee needs clear obligations from the other party, protection of the investment, transparency regarding financial burdens, practical operating terms and fair exit provisions.
An excessively one-sided agreement may create disputes, failed outlets and damage to the network itself. By contrast, a clear and balanced agreement reduces the risk of conflict and allows the relationship to operate with predictability.
Frequently Asked Questions About Franchise Agreements in Greece
Is there a specific franchise law in Greece?
No. Greece does not have a standalone law comprehensively regulating franchise agreements. The applicable framework includes the Greek Civil Code, commercial law, unfair competition law, trademark and intellectual property law, and national and EU competition law.
What is the current key EU framework for vertical agreements?
The key framework is Regulation (EU) 2022/720 on vertical agreements, together with the relevant European Commission guidelines. The previous Regulation 330/2010 has expired and should no longer be used as the main reference point for new agreements.
Can I negotiate the terms of a franchise agreement?
Yes, but the scope for negotiation depends on the network, the bargaining power of the parties and the nature of the term. A franchisor may reasonably insist on terms that ensure uniformity and brand protection. However, financial terms, territorial exclusivity, duration, renewal, termination and transfer provisions often deserve serious negotiation.
What is a franchise fee and is it refundable if I do not start?
The franchise fee is the initial entry fee paid to join the network. Whether it is refundable depends on the agreement and the facts. It is often stated to be non-refundable, especially if the franchisor has already provided training, know-how or support. A different assessment may arise if material misrepresentation or a serious breach of pre-contractual obligations is proven.
How long does a franchise agreement usually last?
There is no single mandatory duration. In practice, many franchise agreements last several years, so that the franchisee can amortise the initial investment. Duration should be assessed together with the level of investment, the franchise fee, royalties, refurbishment obligations, renewal terms and exit options.
What happens if the franchisor breaches the agreement?
Depending on the seriousness of the breach and the terms of the agreement, the franchisee may seek compliance, damages or even consider termination. The response must be timely and properly documented, because long tolerance of a breach may make it more difficult to rely on it later.
Do I need a lawyer even if the agreement is “standard”?
Yes. Precisely because such agreements are usually drafted from the franchisor’s side, they should be carefully reviewed from the franchisee’s perspective before signing. Legal review is not only about changing clauses, but also about understanding risks, financial commitments and the practical consequences of the agreement.
Work with an Experienced Commercial Law Firm in Greece
A franchise agreement may bind a businessperson for many years. What is not reviewed before signing is often difficult to correct later.
Our firm provides specialised legal support in matters involving franchising, commercial contracts, corporate law, distribution, unfair competition and trademark law.
We undertake full legal review of franchise agreements before signing, assessment of financial and operational terms, negotiation of critical clauses, protection of franchisees before they undertake binding commitments, as well as legal support for franchisors wishing to organise their network on a secure contractual basis.
Our aim is for the agreement to be clear, enforceable and balanced, so that the business relationship begins with transparent terms, reduced legal risk and full understanding of each party’s rights and obligations.
This article is for informational purposes only and does not constitute legal advice. Each case requires an individual assessment, based on its specific facts and the applicable legal framework. For tailored legal advice, please contact our office.
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