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Dutch franchise law is laid down in the Franchise Act (Wet franchise), which added Articles 7:911 to 7:922 to the Dutch Civil Code on 1 January 2021. The franchisor must provide key information at least four weeks before signing, support the franchisee and consult it at least once a year. Post-term non-competes are restricted, and franchisees established in the Netherlands keep this protection whatever law governs the contract.
Franchising is a popular business model in the Netherlands, allowing entrepreneurs to run their own business under an established formula. Dutch law defines the franchise agreement (franchiseovereenkomst) as an agreement in which the franchisor, for a fee, grants the franchisee the right and imposes the obligation to exploit a franchise formula in the way the franchisor prescribes (Article 7:911(1) Dutch Civil Code). The formula includes at least a trade mark, model or trade name, house style or design, and know-how that is secret, substantial and identified (Article 7:911(2)(a)).
The Franchise Act does not introduce a registration or licensing requirement. It regulates the relationship between franchisor and franchisee: information before and during the agreement, the duty to act as a good franchisor and a good franchisee, support, annual consultation, consent to certain changes, goodwill and post-term non-compete clauses. Below we explain these rules for both sides.
How is franchising regulated in the Netherlands?
The rules apply between businesses. The franchisor is the person or company that holds or may use a franchise formula and lets others exploit it in the course of its business; the franchisee exploits the formula in the course of its business, for its own account and risk (Article 7:911(2)(c) and (d) Dutch Civil Code).
Title 16 of Book 7 of the Dutch Civil Code is short: twelve articles, from Article 7:911 to Article 7:922. General contract law in Books 3 and 6 continues to apply alongside it.
Until 2021 there was no specific statute for franchising in the Netherlands; franchise relationships were governed by general contract law and case law. Since 1 January 2021, the Franchise Act (in Dutch: “Wet franchise“, Bulletin of Acts and Decrees 2020, 251) has added a separate title on the franchise agreement to the Dutch Civil Code.
Some clauses in a franchise agreement can be unenforceable. The rules of the Franchise Act cannot be set aside to the detriment of franchisees established in the Netherlands, and a clause that conflicts with Article 7:920 (goodwill and non-compete) is void, regardless of the law that governs the agreement (Article 7:922). In addition, a contractual rule does not apply to the extent that this would be unacceptable by standards of reasonableness and fairness (Article 6:248(2)).
For a foreign franchisor entering the Dutch market, this means that a standard international franchise agreement usually needs a Dutch addendum or a Dutch version. Both sides benefit from legal advice before signing.
What does Dutch franchise law require?
The core of the Act is mandatory. For franchisees established in the Netherlands, the parties cannot agree on terms that are less favourable to the franchisee than the Act (Article 7:922 Dutch Civil Code).
On January 1, 2021, the Franchise Law came into effect to strike a balance between the interests of franchisors and franchisees and to counter unfair trading practices. Given the inherent power imbalance between the two parties, the Act requires both to behave as a good franchisor and a good franchisee towards each other (Article 7:912). This detailed guide to Dutch franchise law discusses its key components and implications for both franchisors and franchisees.
What happens in the pre-contractual phase?
The Franchise Act strengthens the franchisee’s information position before the agreement is signed. The prospective franchisee must give the franchisor timely information about its financial position, insofar as reasonably relevant (Article 7:913(1)). The franchisor must provide the information listed in Article 7:913(2) to (4), described below.
The franchisor must provide this information at least four weeks before the agreement is concluded. During that “stand-still” period the franchisor may not change the draft agreement (unless the change benefits the franchisee), may not conclude the franchise agreement or an inseparably linked agreement (a confidentiality agreement is allowed), and may not induce the prospective franchisee to make payments or investments related to the agreement (Article 7:914(1) and (2)). These rules do not apply to a subsequent franchise agreement between the same parties for the same formula (Article 7:914(3)). The period gives the franchisee time to reflect, investigate and consult advisers.
The franchisor must provide the draft franchise agreement with its annexes, a summary of the fees, mark-ups, other financial contributions and investments required, and information on how consultation with franchisees works, to what extent the franchisor may compete with the franchisee (also through a derived formula), and how the franchisee can access turnover data (Article 7:913(2)). Insofar as available within the franchisor or its group and reasonably relevant, it must also provide information about its own financial position and financial data on the proposed location or, failing that, on businesses it considers comparable, explaining why (Article 7:913(3)). Finally, it must provide all other information it knows or should reasonably suspect is relevant (Article 7:913(4)). The prospective franchisee, in turn, must take reasonable measures to avoid signing on the basis of incorrect assumptions (Article 7:915).
What does the duty of care of a franchisor mean?
During the term of the agreement, the franchisor must give the franchisee the assistance and the commercial and technical support that can reasonably be expected, given the nature and purpose of the formula (Article 7:919(1)). Both parties must act as a good franchisor and a good franchisee (Article 7:912).
If the franchisee considers a particular form of assistance or support necessary, it must tell the franchisor, and the parties must then consult each other about it (Article 7:919(2)). The franchisor also has to keep the franchisee informed during the agreement, for example about proposed changes to the agreement, investments it requires and a decision to use a derived formula (Article 7:916(1)).
When must a franchisor ask for consent?
A franchisor must give timely information about proposed changes to the agreement (Article 7:916(1)(a)). Consent is required in a narrower set of cases: when the franchisor, using a clause in the agreement, wants to change the franchise formula or have a derived formula exploited, and for that purpose requires an investment, introduces or increases fees or other contributions, requires the franchisee to bear other costs, or can reasonably foresee a loss of turnover for the franchisee, above a level set in the agreement (Article 7:921(1)). If the agreement sets no such level, prior consent is always required (Article 7:921(2)).
The franchisor then needs the prior consent of either a majority of the franchisees established in the Netherlands that have a franchise agreement for the formula, or each franchisee established in the Netherlands that is affected by the plan (Article 7:921(1), under 1° and 2°). In addition, the franchisor must report each year to what extent the contributions paid in the previous financial year covered the costs they were meant to cover, and the parties must consult at least once a year (Article 7:916(2) and (3)).
How do you terminate a franchise agreement?
The Franchise Act also contains rules for the end of the agreement. A clause that restricts the franchisee from working in a certain way after the agreement ends is valid only if it is in writing, covers only goods or services that compete with those of the franchise, is indispensable to protect the know-how transferred by the franchisor, lasts no longer than one year after the end of the agreement, and does not cover a wider area than the one in which the franchisee exploited the formula (Article 7:920(2)). A clause that does not meet these conditions is void (Article 7:922).
This rule prevents franchisees from being restricted in their future business endeavors after the agreement ends.
The agreement must also state how it will be determined whether there is goodwill in the franchisee’s business, how much, and to what extent it is attributable to the franchisor. It must further state how goodwill reasonably attributable to the franchisee will be compensated at the end of the agreement if the franchisor takes over the business to continue it itself or to transfer it to a new franchisee (Article 7:920(1)).
Does the Franchise Act apply to agreements concluded before 2021?
Yes, with a delay for two articles. For franchise agreements concluded before 1 January 2021, Articles 7:920 (goodwill and non-compete) and 7:921 (consent) applied from two years after the Act entered into force (Article 209 Transitional Act New Civil Code), so from 1 January 2023. The pre-contractual rules matter only when a new agreement is concluded.
Older agreements, handbooks and practices that have not yet been brought into line should be checked against the Act, in particular the goodwill clause, the non-compete clause and the consent mechanism.
Which rights and obligations does a franchisee have?
The franchisee’s statutory rights are the information rights before and during the agreement, reasonable assistance and support, annual consultation, consent to certain changes and the goodwill arrangement (Articles 7:913 to 7:921 Dutch Civil Code). Other benefits, such as an exclusive territory, purchase discounts, training or marketing support, exist only if the franchise agreement provides for them.
Franchisees also have certain obligations under Dutch law. The main obligation is to adhere to all the conditions stipulated in the Franchisee Agreement. This includes paying fees on time, following all operational procedures according to standards set by the Franchisor, respecting territorial boundaries when conducting business activities and so forth. Furthermore, it is important for both parties to abide by any applicable laws regarding competition and consumer protection.
As such, it is essential that franchisees read their Franchisee Agreements carefully before signing them, to be fully aware of their rights and obligations under Dutch law. To ensure compliance with legal requirements each party should prepare necessary documents for franchise agreement prior to entering into the contract.
Which documents do you need for franchise compliance?
The Act does not prescribe a particular form for the franchise agreement itself; only a post-term non-compete clause must be in writing (Article 7:920(2)(a)). In practice the franchisor must have a written draft anyway, because it has to provide the draft agreement with its annexes before signing (Article 7:913(2)(a)).
Dutch law does not prescribe a single “disclosure document” in a set format, as some other countries do. It requires the specific information listed in Article 7:913, provided in a way that keeps it accessible, unchanged, for future reference, and formulated so that the prospective franchisee can reasonably make a well-considered decision (Article 7:917). In practice, franchisors bundle this into an information pack with the draft agreement.
There is no franchise licence. A business established in the Netherlands, including a branch of a foreign company, is entered in the Trade Register (Article 5 Trade Register Act 2007). Depending on the sector, the franchisee may need ordinary business permits, for example for a restaurant or a shop; those rules are the same as for any other business.
Which requirements must a franchise agreement meet?
There is no government approval or application procedure for a franchise in the Netherlands. The statutory requirements concern the agreement itself: the pre-contractual information and the four-week period (Articles 7:913 and 7:914), the goodwill arrangement (Article 7:920(1)) and, if there is a non-compete clause, the conditions of Article 7:920(2).
Within those limits the parties are free to agree on the terms of their relationship.
The contract should clearly define rights and obligations of each party as well as provisions such as royalty fees, duration of the agreement, training requirements, territory restrictions, and other relevant details. The agreement should also deal with the use of the trade marks and other intellectual property of the formula and, by law, must contain the goodwill arrangement (Article 7:920(1)). Finally, it is important to ensure that proper dispute resolution clauses are incorporated into the contract to minimize potential conflicts down the road. Franchise agreements are one of the contract types covered under contract law in the Netherlands.
With these agreements in place, businesses can move forward with confidence knowing that their relationships have been legally established according to Dutch law. The next step towards successful franchising in Netherlands involves understanding operating guidelines which will lay out further expectations for running a successful franchise operation.
Which terms do franchisor and franchisee negotiate themselves?
The Franchise Act mainly protects the franchisee, but it also imposes duties on the franchisee, such as sharing information on its financial position and investigating before signing (Articles 7:913(1) and 7:915).
A key element of any successful franchise relationship is a strong operating agreement that clearly sets out all terms and conditions, including liabilities for both parties.
When drafting an agreement between a franchisor and a franchisee in the Netherlands, the parties settle points such as the scope of the business, the payment structure (initial fee, ongoing royalties), the term, exit arrangements, dispute resolution and advertising requirements. Many of these points are negotiable. The rules of the Franchise Act, however, cannot be set aside to the detriment of a franchisee established in the Netherlands, and a clause that conflicts with Article 7:920 is void (Article 7:922).
It is essential that all agreements related to a Dutch franchise operation include clear language setting out the responsibilities of each party, ensuring compliance with applicable local laws, and providing legal protection for both Franchisor and Franchisee in case of disputes. By following this advice, potential issues can be avoided before they become costly problems down the line. With well-defined rules in place from the outset, both parties will benefit from a positive and profitable working relationship.
This section on operating guidelines provides a good foundation for understanding how best to comply with Netherlands franchise regulations when setting up a new venture. Liability considerations for franchisors and franchisees should now be explored further in order to ensure everyone involved fully understands their respective risks associated with their particular arrangement.
Who is liable in a Dutch franchise relationship?
The Franchise Act does not contain its own liability rules. Liability follows general Dutch contract law: a party that fails to perform an obligation must compensate the other party’s loss, unless the failure cannot be attributed to it (Article 6:74(1) Dutch Civil Code); where performance is still possible, the debtor must usually first be in default (Article 6:74(2)). This applies to both sides, for instance when a franchisor fails to give the required information or support, or when a franchisee fails to pay fees or to follow the formula.
Additionally, it is important to consider the implications of third-party claims. If a dispute arises between franchisor and franchisee due to a claim by a third party, both parties must take appropriate steps to ensure that all liabilities are addressed adequately. This includes taking into account any potential legal costs associated with defending against or settling such claims. Negotiating indemnification clauses in contracts can help protect both sides from bearing undue financial burden in these types of situations.
Parties can agree on the forum for disputes: a Dutch or foreign court, or arbitration. Which option is best depends on the case; a clear clause in the agreement avoids a separate dispute about jurisdiction. See also our page on litigation in the Netherlands.
Which commercial terms are left to the parties?
The Franchise Act does not regulate the commercial terms themselves. The following points are a matter of negotiation, within the limits of the Act:
- Franchise fees – the initial fee and any other fees are agreed by contract; the franchisor must summarise them before signing (Article 7:913(2)(b)).
- Territorial rights – an exclusive territory exists only if the agreement grants one; the franchisor must disclose to what extent it may compete with the franchisee (Article 7:913(2)(c)).
- Duration – the Act sets no minimum or maximum term; the term and any renewal are agreed by the parties.
- Royalties and contributions – the amount and basis are agreed; each year the franchisor must report whether mark-ups and other contributions covered the costs they were meant to cover (Article 7:916(2)).
Because these terms are negotiated, a prospective franchisee should compare them with the financial information received under Article 7:913 before signing.
Do you need a licence to franchise in the Netherlands?
No. Neither the franchisor nor the franchisee needs a franchise-specific licence or registration in the Netherlands.
What a franchisor does need is a formula that meets the statutory definition, a franchise agreement that complies with Title 16 of Book 7 Dutch Civil Code, and a procedure to provide the pre-contractual information at least four weeks before signing (Articles 7:911, 7:913 and 7:914).
The franchisee’s business is entered in the Trade Register like any other business (Article 5 Trade Register Act 2007). Sector permits, for example for serving alcohol, depend on the activity and not on the franchise structure.
The Franchise Act is enforced through civil law, not through fines. A clause that conflicts with Article 7:920 is void (Article 7:922); a failure to comply with the information duties can lead to a claim for damages (Article 6:74) or, if the franchisee signed because of incorrect information, to annulment for error (Article 6:228 Dutch Civil Code).
By taking these steps beforehand, potential pitfalls can often be avoided altogether thereby safeguarding investments and protecting interests at stake during termination provisions under dutch franchise law discussions later down the line.
How are Dutch franchise disputes resolved?
The Franchise Act contains no special dispute resolution procedure. Disputes between franchisor and franchisee go to the competent court or, if the parties have agreed on it, to arbitration; mediation is also possible by agreement.
In such cases, it is important that all parties involved understand the applicable laws and regulations related to franchising in the Netherlands.
Typical franchise disputes concern the information given before signing, the support provided, changes to the formula without the required consent, the goodwill payment and the non-compete clause. The franchisee’s own duty to investigate (Article 7:915) plays a role when it claims to have been misinformed.
Clear documentation of the information provided and of consultations with franchisees makes such disputes easier to resolve.
Which information must be disclosed before signing?
The pre-contractual information duties in the Netherlands are extensive. Prospective franchisees should receive all relevant information before signing.
Before signing, the franchisor must provide the following information (Article 7:913(2) to (4) Dutch Civil Code):
| Item | Description |
|---|---|
| Draft agreement | The draft franchise agreement, including annexes (Article 7:913(2)(a)). |
| Fees and investments | The content and purpose of the rules on fees, mark-ups and other financial contributions, and on the investments required (Article 7:913(2)(b)). |
| Consultation and competition | How and how often franchisor and franchisees consult, contact details of any franchisee representative body, the extent to which the franchisor may compete with the franchisee (also through a derived formula), and the franchisee’s access to turnover data (Article 7:913(2)(c)). |
| Financial information | The franchisor’s financial position and financial data on the proposed location or comparable businesses, insofar as available within the franchisor or its group and reasonably relevant (Article 7:913(3)). |
| Other relevant information | All other information the franchisor knows or should reasonably suspect is relevant to concluding the agreement (Article 7:913(4)). |
The information must reach the prospective franchisee at least four weeks before signing (Article 7:914(1)), in a form that remains accessible and unchanged for future reference (Article 7:917(1)). Rules on the nature, content and manner of providing the information may be laid down by general administrative order (Article 7:918).
Frequently asked questions about Dutch franchise law
Is there a franchise law in the Netherlands?
Yes. Since 1 January 2021, Title 16 of Book 7 Dutch Civil Code (Articles 7:911 to 7:922) regulates the franchise agreement. It covers pre-contractual information, the four-week stand-still period, support, annual consultation, consent to certain changes, goodwill and post-term non-compete clauses.
What do I need to be a franchisor in the Netherlands?
No franchise licence or registration. You need a formula with a trade mark, trade name or house style and secret, substantial and identified know-how (Article 7:911(2)(a)), a franchise agreement with a goodwill arrangement (Article 7:920(1)), and the information listed in Article 7:913, provided at least four weeks before signing (Article 7:914). A business established in the Netherlands is entered in the Trade Register.
Does the Dutch Franchise Act apply if the agreement is governed by foreign law?
For franchisees established in the Netherlands, yes. The rules of Title 16 cannot be set aside to their detriment, and a clause that conflicts with Article 7:920 is void, regardless of the law that governs the franchise agreement (Article 7:922 Dutch Civil Code).
Is a non-compete clause in a Dutch franchise agreement valid?
Only if it meets all conditions of Article 7:920(2): it is in writing, covers only competing goods or services, is indispensable to protect the franchisor’s know-how, lasts no longer than one year after the agreement ends, and covers no wider area than the one where the franchisee operated. For agreements concluded before 2021, this has applied since 1 January 2023.
Can a franchisor change the franchise formula without the franchisees’ consent?
Not always. If the franchisor uses a clause in the agreement to change the formula (or has a derived formula exploited) and this requires an investment, higher fees or other costs from the franchisee, or foreseeably reduces its turnover, above a level set in the agreement, the franchisor needs prior consent from a majority of its franchisees established in the Netherlands or from each affected franchisee (Article 7:921(1)). If the agreement sets no level, consent is always required (Article 7:921(2)).
Primary sources
- Dutch Civil Code Book 7, Title 16 (franchise agreement): Articles 7:911, 7:912, 7:913, 7:914, 7:915, 7:916, 7:917, 7:918, 7:919, 7:920, 7:921 and 7:922
- Dutch Civil Code Book 6: Articles 6:74, 6:228 and 6:248
- Transitional Act New Civil Code (Overgangswet nieuw Burgerlijk Wetboek), Article 209
- Trade Register Act 2007 (Handelsregisterwet 2007), Article 5
- Franchise Act, Bulletin of Acts and Decrees (Staatsblad) 2020, 251
Contact our franchise lawyers in the Netherlands
If you have any questions or require legal assistance regarding franchise law in the Netherlands, please don’t hesitate to reach out to our knowledgeable and dedicated team at our Dutch law firm.
