Drawing up a franchise contract

You must give each other information. This applies to the franchisee and the franchiser. For example, about both 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.

During the term of the franchise contract, the franchiser must provide assistance to the franchisee. This is the so-called duty of care (zorgplicht). The franchiser offers support, for example, by providing courses, advertising, and financial help.

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 first ask de franchiser to agree to any changes, and provide all relevant information.

When the contract ends, a written non-competition clause may apply. This may apply maximum 1 year. And only for the area in which the franchisee worked. Check if this is correct in the contract. This allows the franchisee to do something else. Also, the franchiser may not force the franchisee to sell their business on unfavourable terms. The franchise contract therefore sets out howgoodwill is determined and calculated.

Before the franchiser shares any information about the franchise formula, the franchisee will usually first be asked to sign a non-disclosure agreement. This way, the franchiser prevents business-sensitive information from becoming public.

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. With this step, the executive period begins. 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.

Location survey

This is followed by a location survey (vestigingsplaatsonderzoek, vpo). This survey gives you an estimate of turnover at the location where the franchise should be located. A location survey is not mandatory. But the franchise law states that a franchisee must research important information before entering into a franchise contract. This is called duty of enquiry (onderzoeksplicht). You agree on who will conduct and pay for the location survey. You can also choose to do this together.

Map your business area

The KVK Location Scan (in Dutch) and the KVK Company Counter provide you with information about your business area. Think of data on industry peers, survival rates, potential customers and inhabitants. Compared to the Dutch average.

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 franchise contract contains agreements on:

• the term of the contract
• the franchise formula and the plan
• the franchise cooperation and what this means for the franchisor and franchisee
• the use of the formula and trade name
• the area of your cooperation
• marketing, corporate identity and sales support
• the purchasing conditions and delivery of orders
• independence and indemnity of the franchisee
• fees and payment terms
• guidance, education and training opportunities
• administration, accounting and insurance
• consultation between the franchisor and franchisee, with the franchise association and franchisee council
• the transfer of the business and on what conditions
• how you can stop the franchise cooperation and what conditions you must comply with

The website of The National Franchise Guide contains an example of a franchise contract (in Dutch).