In the franchise contract, you lay down agreements. For example, on the duration of the franchise agreement, insurances, and the business premises. The contract also states what fees you have to pay to run the franchise.
Franchise law
The franchise law has been in place since 2021. It replaces the franchise code that worked on the basis of agreements and was not a legal requirement. The franchise law gives more clarity. The legal rules strengthen the position of franchisees. Read more about the franchise law on KVK.nl (in Dutch).
Before you sign: protect your interests
Before you sign a franchise contract, there are a number of things you should pay attention to. This will strengthen your position as a franchisee or franchiser.
1. Sharing financial and general information and cooling-off period
You must give information to each other. This applies to the franchisee and the franchiser. For example, about your financial situation, the franchise formula, and investments. This allows the franchisee to properly research how healthy the franchise formula is and what the risks are.
After that, you both have a 4-week cooling-off period during which you can do research. You may not make other agreements or enforce payments during this time. Read more about what information you must provide.
Engage legal counsel
Always read the franchise contract carefully and ask questions. Engage legal counsel if you do not understand something or find it unclear.
2. Duty of care
During the term of the franchise contract, the franchiser must provide assistance to the franchisee. This is the so-called duty of care. The franchiser offers support, for example, by providing courses, advertising, and financial help.
3. Changes during the agreement
If changes take place during the agreement, the franchiser must inform the franchisee in time. For example, if the franchiser wants to start an online shop or offer a different range of products. The franchiser must seek prior consent and provide all relevant information.
4. End of contract
When the contract ends, a written non-competition clause may apply. This may not exceed 1 year. And only for the area in which the franchisee worked. Check this. This prevents that the franchisee is restricted from doing anything else. Also, the franchiser may not force the franchisee to sell their business on unfavourable terms. The franchise contract therefore sets out how goodwill is determined and calculated.
Read more about the points of attention before entering into a contract on KVK.nl.
Drawing up a franchise contract in 3 steps
1. Confidentiality agreement: exchange of information
Often, the franchiser will first ask you to sign a non-disclosure agreement. This prevents the franchiser from disclosing business-sensitive information. And allows the franchiser to give detailed information about the formula.
2. Letter of intent: start of the executive period
If the franchisee and the franchiser have a positive feeling, they conclude a letter of intent. This is the first agreement between franchiser and franchisee. This begins the executive period. Usually, the franchisee then pays part or all of the entry fee. The franchisee prepares a business plan with which the franchiser usually cooperates. This is followed by an establishment location survey that provides an estimate of the turnover of the intended location.
Cooperation not yet final
Both the franchisee and the franchiser may still decide not to work together at this stage. For example, because the results of the establishment location survey are disappointing or the financing fails. The franchiser may also have insufficient confidence in the franchisee after all.
3. The franchise contract: during franchising
This agreement sets out the cooperation between the franchiser and the franchisee. On what terms the cooperation will take place and what rights and obligations both have.
The website of The National Franchise Guide contains an example of a franchise contract (in Dutch).