Published on · Last updated
A franchise agreement lawyer in the Netherlands advises franchisors and franchisees under the statutory franchise rules in Title 16 of Book 7 of the Dutch Civil Code (Burgerlijk Wetboek), in force since 1 January 2021 (Article 7:911 onwards). These rules require pre-contractual disclosure, a four-week standstill period, a goodwill arrangement and limits on post-term non-compete clauses.
We advise on drafting, reviewing and negotiating franchise agreements in the Netherlands, on the obligations under the Dutch Franchise Act (Wet franchise), and on disputes during the term of the agreement. Our team also advises on terminating franchise agreements in the Netherlands.
What is a Dutch franchise agreement?
A franchise agreement is an agreement under which the franchisor, in return for payment, grants the franchisee the right, and imposes the obligation, to operate a franchise formula in the manner the franchisor prescribes, for the production or sale of goods or the provision of services (Article 7:911(1) DCC). The franchise formula includes at least a trademark, design or trade name, house style or drawing, and know-how: practical information not protected by an intellectual property right, derived from the franchisor’s experience and the research it has carried out, which is secret, substantial and identified (Article 7:911(2)(a)). The franchisee operates the formula for its own account and risk (Article 7:911(2)(d)).
The rules were introduced by the Dutch Franchise Act (Bulletin of Acts and Decrees 2020, 251). Franchisor and franchisee must behave towards each other as a good franchisor and a good franchisee (Article 7:912 DCC). Franchisees established in the Netherlands cannot be deprived of the protection of this Title to their detriment, and a clause contrary to Article 7:920 is void, whatever law governs the agreement (Article 7:922 DCC). Tax, trademark and competition law are not part of this Title; they follow from other legislation.
When do you need legal advice on franchising?
Legal advice is most useful at the moments where the law sets concrete requirements:
- Before signing: the franchisor must provide the draft agreement and specific information at least four weeks before the agreement is concluded (Article 7:913 and 7:914 DCC).
- During the agreement: when the franchisor proposes changes, requires investments or wants to use a derived formula (Article 7:916 and 7:921 DCC).
- At the end of the agreement: when goodwill must be valued and compensated, or when a non-compete clause is invoked (Article 7:920 DCC).
- In a dispute: about fees, support, termination or damages, before positions harden.
What must a franchisor disclose before a Dutch franchise agreement is signed?
The franchisor must provide the prospective franchisee in good time with (Article 7:913(2)-(4) DCC):
- the draft franchise agreement, including its annexes;
- an overview of the fees, mark-ups and other financial contributions the franchisee must pay, and of the investments required;
- information on how often and how the franchisor consults its franchisees, the extent to which the franchisor may compete with the franchisee (also through a derived formula), and the franchisee’s access to turnover data;
- information on its own financial position and financial data on the intended location (or on comparable businesses, explaining why they are comparable), insofar as available to the franchisor or its group and reasonably relevant;
- all other information the franchisor knows or should reasonably suspect is relevant to the decision to sign.
This information must be provided at least four weeks before the agreement is concluded. During that standstill period, the franchisor may not change the draft (unless to the franchisee’s advantage), may not conclude the agreement or an inseparable related agreement (a confidentiality agreement excepted) and may not induce the franchisee to make related payments or investments (Article 7:914(1)-(2) DCC). These rules do not apply to a subsequent agreement between the same parties for the same formula (Article 7:914(3)). The information must be accessible for future reference and allow a well-considered decision (Article 7:917 DCC).
The prospective franchisee has duties too. It must provide relevant information about its own financial position in good time (Article 7:913(1)) and, within the limits of reasonableness and fairness, take the necessary measures to avoid signing on the basis of incorrect assumptions (Article 7:915 DCC). In practice, this means checking the franchisor’s forecasts and asking questions before signing.
Which services does a Dutch franchise lawyer provide?
For franchisors, we draft and update franchise agreements and disclosure documents, set up the consultation and consent arrangements the law requires, and advise on roll-out, formula changes and exits. For franchisees, we review the agreement and the information received before signing, check the financial assumptions with you and negotiate improvements.
The statutory Title applies to franchise agreements since 1 January 2021. For agreements concluded before that date, the goodwill and non-compete rules (Article 7:920) and the consent rule for formula changes (Article 7:921) applied from two years later, so from 1 January 2023 (Article 209 of the Transitional Act for the new Civil Code). Older agreements may therefore need to be updated.
What are the franchisor’s obligations during a Dutch franchise agreement?
During the agreement, the franchisor must inform the franchisee in good time about intended changes to the agreement, investments it requires, a decision to use a derived formula, and other information relevant to performing the agreement (Article 7:916(1) DCC). Each year, the franchisor must report to what extent the mark-ups and other financial contributions paid in the previous financial year covered the costs or investments they were meant to cover (Article 7:916(2)). Franchisor and franchisee consult at least once a year (Article 7:916(3)).
The franchisor must also give the assistance and commercial and technical support that can reasonably be expected in view of the nature and purpose of the formula. If the franchisee considers a specific form of support necessary, it informs the franchisor and the parties consult about it (Article 7:919 DCC).
How do you negotiate a franchise agreement?
In our experience, the points below deserve attention in every negotiation. Several of them follow directly from the law:
- Fees and investments: entry fee, royalties, marketing contributions and the investments the franchisee must make, now and during the term.
- Formula changes: the threshold above which the franchisor needs franchisee consent for changes with financial consequences; without a threshold in the agreement, consent is always required (Article 7:921(2) DCC).
- Goodwill: the agreement must state how goodwill is determined and how goodwill attributable to the franchisee is compensated if the franchisor takes over the business (Article 7:920(1) DCC).
- Non-compete clause: only valid within the statutory limits (Article 7:920(2)).
- Term and termination: duration, renewal, notice periods and grounds for early termination.
- Disputes: which court has jurisdiction, or whether disputes go to arbitration (Article 1020 Dutch Code of Civil Procedure, Rv), and whether mediation comes first.
Which disputes arise from franchise agreements?
Disputes between franchisor and franchisee often concern fees and royalties, the level of support, turnover forecasts given before signing, formula changes, competition from the franchisor (for example online or through a derived formula), termination and goodwill.
The general rules of Dutch contract law apply alongside the franchise Title. A party that fails to perform must compensate the resulting damage, unless the failure cannot be attributed to it; insofar as performance is not already permanently impossible, this requires default (verzuim) first (Article 6:74 DCC). Default usually arises after a written notice of default setting a reasonable period for performance, if performance does not follow within that period (Article 6:82(1) DCC); in the cases listed in Article 6:83 DCC, default arises without notice. Any failure to perform also entitles the other party to dissolve the agreement in whole or in part, unless the failure, given its special nature or minor importance, does not justify dissolution; where performance is not permanently or temporarily impossible, this right arises only once the other party is in default (Article 6:265 DCC). Dissolution takes place by written statement or, on a claim, by the court (Article 6:267 DCC).
| Dispute | Possible legal route |
|---|---|
| Insufficient support or information from the franchisor | Claim performance or damages; statutory duties in Articles 7:916 and 7:919 DCC |
| Termination | Check the contractual grounds and notice period; in urgent cases, summary proceedings (kort geding) for provisional measures such as continuation |
| Unpaid fees or royalties | Notice of default where required, then a claim for payment or damages |
| Breach of contract | Performance, damages or (partial) dissolution of the agreement |
| Formula change or derived formula without consent | Rely on the consent requirement of Article 7:921 DCC |
| Goodwill at the end of the agreement | Apply the contractual goodwill arrangement required by Article 7:920(1) DCC |
We act for either the franchisor or the franchisee in a dispute, never for both sides of the same dispute.
What does a Dutch franchise lawyer cost?
The costs depend on the work: reviewing an agreement before signing is a different assignment from drafting a complete franchise system or conducting proceedings. We agree in advance whether we work on an hourly basis or for a fixed fee for a defined scope, and we give an estimate before we start.
In court proceedings, the party that loses is ordered to pay the costs of the proceedings, although the court can split the costs if each party loses on some points (Article 237(1) Rv). The court sets the amount in its judgment (Article 237(3) Rv); in practice, it is often lower than the actual lawyer’s fees.
What should you consider when choosing a franchise attorney?
Check whether the lawyer works with franchise agreements and the statutory franchise rules on a regular basis, whether they can also conduct proceedings if a dispute escalates, and whether they act for your side of the relationship. For foreign franchisors and franchisees, it also matters that the lawyer can advise in English and explain the Dutch rules against the background of the law you are used to.
Is a non-compete clause in a Dutch franchise agreement valid?
A clause that restricts the franchisee from working in a certain way after the franchise agreement ends is only valid if all of the following conditions are met (Article 7:920(2) DCC):
- it is in writing;
- it only concerns goods or services that compete with the goods or services covered by the franchise agreement;
- it is indispensable to protect the know-how the franchisor transferred to the franchisee;
- it does not last longer than one year after the end of the agreement; and
- its geographical scope is not wider than the area in which the franchisee operated the formula under that agreement.
A clause contrary to Article 7:920 is void, whatever law governs the agreement (Article 7:922 DCC).
What happens to goodwill when a Dutch franchise agreement ends?
The franchise agreement must in any event state how it will be determined whether there is goodwill in the franchisee’s business, how large it is and to what extent it is attributable to the franchisor (Article 7:920(1)(a) DCC). It must also state how goodwill reasonably attributable to the franchisee is compensated on termination if the franchisor takes over the business to continue it itself or to transfer it to a new franchisee (Article 7:920(1)(b)).
The law does not prescribe a valuation method or an amount; the parties must agree on them. If the agreement contains no arrangement, or an unclear one, that is a frequent source of disputes at the end of the relationship.
How does franchise litigation work in the Netherlands?
Most franchise disputes start with correspondence and negotiation, sometimes with the help of a mediator. Mediation is voluntary: it takes place only if both parties agree, unless the franchise agreement already requires it before proceedings are started.
If that fails, the dispute goes to the civil courts, or to arbitration if the parties have agreed on it (Article 1020 Rv). In urgent matters, such as a threatened termination or the blocking of supplies, a party can ask the preliminary relief judge for an immediate provisional measure in summary proceedings (kort geding) (Article 254 Rv). A decision in summary proceedings is provisional and does not prejudice the proceedings on the merits (Article 257 Rv).
Read more on our page about litigation in the Netherlands.
Can a franchisor change the franchise formula during the agreement?
A franchisor can change the formula if the agreement allows it, but the law sets limits. If the franchisor, using a clause in the agreement, wants to change the formula or to operate a derived formula (a similar formula for largely the same goods or services, Article 7:911(2)(b)) without amending the agreement, and this requires an investment, introduces or increases a financial contribution, imposes other costs or can be expected to cause a loss of turnover above a level set in the agreement, it needs prior consent (Article 7:921(1) DCC). That consent must come from a majority of its franchisees established in the Netherlands for that formula, or from each Netherlands-based franchisee affected.
If the agreement does not set such a level, prior consent is always required, whatever the size of the investment, contribution, costs or loss of turnover (Article 7:921(2)). The franchisor must also notify the franchisee in good time of a decision to use a derived formula (Article 7:916(1)(c)).
How can a Dutch franchise agreement be terminated?
The Dutch franchise Title contains no specific termination rules, so the agreement itself and general contract law decide. A fixed-term agreement normally ends on expiry, unless it provides for renewal. Whether an agreement for an indefinite period can be terminated depends on its terms and the applicable statutory provisions. If neither regulates termination, it can in principle be terminated, but reasonableness and fairness may require a sufficiently compelling reason, a certain notice period or an offer of compensation, depending on the nature and content of the agreement and the circumstances (Supreme Court 28 October 2011, ECLI:NL:HR:2011:BQ9854, para. 3.5.1).
In the event of a breach, the other party may dissolve the agreement under the conditions of Article 6:265 DCC, by written statement or through the court (Article 6:267). If the matter is urgent, a party can ask for provisional measures in summary proceedings. See also our page on terminating franchise agreements in the Netherlands.
Does Dutch franchise law apply to foreign franchisors?
Partly, if the franchisee is established in the Netherlands. The parties cannot deviate from the franchise Title to the detriment of franchisees established in the Netherlands, and for those franchisees a clause contrary to Article 7:920 is void, whatever law governs the franchise agreement (Article 7:922 DCC). A foreign franchisor that chooses its own law for a Dutch franchisee must therefore in any event comply with the Dutch goodwill and non-compete rules of Article 7:920. Article 7:922 attaches the words “whatever law governs” only to Article 7:920; whether the other rules of the Title (disclosure, standstill, consultation) also apply under a foreign governing law does not follow from its text.
We advise foreign franchisors entering the Dutch market and Dutch franchisees of international formulas, in English. More on Dutch contract law can be found on our page on contract law in the Netherlands.
Frequently asked questions about franchise lawyers in the Netherlands
What does a franchise lawyer in the Netherlands do?
A franchise lawyer drafts, reviews and negotiates franchise agreements and disclosure documents, checks compliance with the statutory franchise rules in Articles 7:911-7:922 of the Dutch Civil Code, and acts for the franchisor or the franchisee in disputes about fees, support, formula changes, termination and goodwill.
Is there a specific franchise law in the Netherlands?
Yes. Since 1 January 2021, Title 16 of Book 7 of the Dutch Civil Code regulates the franchise agreement (Article 7:911 onwards). For agreements concluded before that date, the goodwill and non-compete rules and the consent rule for formula changes apply from 1 January 2023 (Article 209 of the Transitional Act).
How long before signing must a franchisor provide information?
At least four weeks before the franchise agreement is concluded (Article 7:914(1) DCC). During that period, the franchisor may not change the draft to the franchisee’s disadvantage, conclude the agreement or induce related payments or investments. The rule does not apply to a subsequent agreement between the same parties for the same formula.
Can a franchisor enforce a non-compete after the franchise agreement ends?
Only if the clause is in writing, concerns competing goods or services, is indispensable to protect the transferred know-how, lasts no longer than one year and does not extend beyond the area in which the franchisee operated (Article 7:920(2) DCC). A clause contrary to Article 7:920 is void, whatever law governs the agreement (Article 7:922).
Can a franchise dispute be resolved through mediation or arbitration?
Yes. Mediation is possible if both parties agree to it, or if the agreement requires it. Parties can also agree that disputes will be decided by arbitration instead of the courts (Article 1020 Dutch Code of Civil Procedure). An arbitration agreement does not prevent a party from going to the preliminary relief judge in summary proceedings (Article 1022a Rv).
Primary sources
- Dutch Civil Code, Book 7: Articles 7:911, 7:912, 7:913, 7:914, 7:915, 7:916, 7:917, 7:919, 7:920, 7:921 and 7:922
- Dutch Civil Code, Book 6: Articles 6:74, 6:82, 6:83, 6:265 and 6:267
- Dutch Code of Civil Procedure (Rv): Articles 237, 254, 257, 1020 and 1022a
- Article 209 of the Transitional Act for the new Civil Code
- Dutch Franchise Act (Wet franchise), Bulletin of Acts and Decrees 2020, 251; entry into force on 1 January 2021 (Bulletin of Acts and Decrees 2020, 493)
- Supreme Court 28 October 2011, ECLI:NL:HR:2011:BQ9854 (termination of an agreement for an indefinite period)
How can our franchise lawyers help you?
Whether you are a franchisor setting up or expanding a network in the Netherlands, or a franchisee about to sign or in a dispute, we can review your position under the Dutch franchise rules and general contract law, and help you negotiate or litigate. Please get in touch to discuss your situation.
When should you engage a franchise agreement lawyer?
If you have any questions or require legal assistance from a franchise agreement lawyer in the Netherlands, please don’t hesitate to reach out to our knowledgeable and dedicated team at our Dutch law firm.
