Franchise agreement

What is a franchise agreement?

A franchise agreement is a contract under which one party – the franchisor – grants another party – the franchisee – the right to operate a business using the franchisor’s brand, business model, know-how, and commercial systems. In practice, this type of agreement allows the franchisee to run a business under an established name and according to defined operational standards, usually in exchange for initial and ongoing fees.

A franchise agreement is not regulated in a single dedicated statute under Polish law. It is generally treated as an unnamed contract shaped by the principle of freedom of contract set out in the Polish Civil Code. This means that the rights and obligations of the parties depend primarily on the wording of the agreement, the nature of the legal relationship, and the general rules of civil and commercial law. Depending on the structure of the arrangement, issues relating to intellectual property, competition law, consumer law, tax, employment, and data protection may also become relevant.

Although franchise arrangements are often associated with retail, gastronomy, education, fitness, or service networks, the legal risks are not limited to one sector. A properly drafted franchise agreement should clearly define the business concept, the scope of the licence to use trademarks and other intellectual property, operating rules, territorial exclusivity if any, payment mechanisms, quality control, training, reporting duties, confidentiality, non-compete obligations, liability, and termination rules.

What does a franchise agreement regulate in practice?

In practical terms, a franchise agreement regulates how the franchise business is to be established, operated, supervised, and potentially ended. It usually specifies what the franchisor provides – for example, the right to use the brand, operating manuals, training, supply arrangements, marketing support, or access to software and business processes. At the same time, it defines what the franchisee must do, including compliance with network standards, payment of franchise fees, purchase obligations, sales reporting, participation in advertising campaigns, and protection of confidential information.

One of the key legal issues is the balance between operational uniformity and the franchisee’s status as an independent entrepreneur. The franchisor typically seeks to protect brand consistency and business standards across the network. The franchisee, however, usually expects sufficient commercial autonomy and transparent cost allocation. Poorly drafted provisions may lead to disputes over hidden fees, unilateral changes to the operating model, mandatory sourcing, excessive control rights, or restrictions after termination.

A franchise agreement may also regulate exclusivity and territory. In some cases, the franchisee receives an exclusive area in which the franchisor will not open another outlet or appoint another franchisee. In other cases, exclusivity is excluded or limited. This should be described precisely, because vague wording often creates disputes, especially in online sales models or where several sales channels operate in parallel.

Another important area is intellectual property. The agreement should explain exactly which trademarks, trade names, logos, manuals, software, designs, and marketing materials may be used, under what conditions, and for how long. It should also address the consequences of infringement, misuse, or continued use of the brand after the agreement ends.

When is legal support in relation to a franchise agreement advisable?

Legal support is advisable both before signing a franchise agreement and during its performance. For a potential franchisee, legal review helps determine whether the agreement reflects the commercial assumptions presented during negotiations and whether the model transfers disproportionate legal or financial risk. For a franchisor, professional drafting helps protect the network, secure know-how, standardise operations, and reduce the risk of inconsistent interpretation across multiple locations.

Private individuals entering business for the first time often underestimate the legal and financial consequences of franchise contracts. Entrepreneurs already operating in the market may also face difficulties when expanding through a franchise network, acquiring an existing franchise outlet, restructuring the business, or ending cooperation with a franchise partner. In each of these situations, the wording of the agreement and the actual way the relationship is performed may have direct consequences for liability, enforceability of claims, and business continuity.

Particular caution is needed where the agreement includes long fixed terms, significant entry fees, mandatory investments, complicated fee structures, broad audit rights, post-term non-compete clauses, or penalty mechanisms. It is also important to verify whether contractual restrictions are compatible with competition law and whether the agreement reflects the real division of responsibilities for staff, premises, taxes, permits, and customer complaints.

An early legal consultation can help avoid drafting errors, unenforceable clauses, commercial disputes, reputational harm, or financial loss. It can also help clarify whether the contract should be supplemented by additional documents, such as trademark licence terms, supply agreements, data processing arrangements, confidentiality undertakings, or internal operational policies.

Law firm support in matters concerning franchise agreements may include in particular:

drafting and negotiating franchise agreements;
review of franchise documentation from the perspective of franchisees and franchisors;
assessment of trademark, know-how, and intellectual property protection;
analysis of exclusivity, territory, non-compete, and termination clauses;
support in disputes arising from franchise relationships;
advice on restructuring, transfer, or exit from a franchise network;
verification of compliance with commercial, competition, employment, and tax regulations.

Need legal support in relation to a franchise agreement? Contact us.

Franchise agreement