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Terminating a franchise agreement in the Netherlands means applying two sets of rules: the general Dutch rules on ending long-term contracts and the franchise title of the Dutch Civil Code (Articles 7:911-7:922), which governs goodwill and post-term non-competes. For franchisees established in the Netherlands, the parties cannot deviate from that title to the franchisee’s detriment, and a clause contrary to Article 7:920 is void whatever law the contract chooses (Article 7:922).
This page is for foreign franchisors with franchisees in the Netherlands and for franchisees who want to leave a formula or have received a termination letter. It explains when a franchise agreement can be terminated or rescinded, when compensation is due, what the Dutch Franchise Act requires on goodwill and non-competes, and what to arrange before the relationship ends.
Which Dutch rules apply when a franchise agreement ends?
Title 7.16 of the Dutch Civil Code (the Franchise Act) applies to any agreement in which a franchisor grants a franchisee, for a fee, the right and the obligation to operate a franchise formula in the manner the franchisor prescribes (Article 7:911(1)).
The title has two features a foreign franchisor should know. First, it cannot be deviated from to the detriment of franchisees established in the Netherlands, and a clause contrary to Article 7:920 is void, regardless of the law governing the franchise agreement (Article 7:922). A choice of foreign law does not avoid these rules. Second, both parties must act towards each other as a good franchisor and a good franchisee (Article 7:912).
The title does not regulate termination as such. Whether and how a franchise agreement can be ended therefore follows from the contract and the general rules on long-term contracts, which our main page on terminating a long-term business agreement under Dutch law explains. For an overview of the Act as a whole, see our page on the Dutch Franchise Act.
Can a franchisor or franchisee terminate by notice?
Yes, if the contract allows it or the agreement runs for an indefinite term. A fixed-term franchise agreement without an early-termination clause generally runs until its end date. In all cases, reasonableness and fairness can attach further requirements to a notice.
Most franchise agreements contain a termination clause. Such an agreement is in principle terminable on the terms of that clause, but reasonableness and fairness can, given the nature of the agreement and the circumstances, require a weighty reason, a certain notice period or an offer of compensation (Article 6:248(1) Dutch Civil Code). Relying on the clause can also be unacceptable (Article 6:248(2); HR 2 February 2018, ECLI:NL:HR:2018:141, paras. 3.6.3-3.6.4).
The Hoge Raad applied this test to a franchise agreement in the Leen Bakker case (HR 29 November 2024, ECLI:NL:HR:2024:1709). The franchisor had decided to stop franchising and to run its stores itself, and gave notice under a clause allowing termination if continuation could not reasonably be required. The court of appeal held the notice valid, but found that reasonableness and fairness required compensation. The Hoge Raad upheld that part of the judgment (paras. 3.2-3.5) and quashed it only on the costs of the proceedings.
For an agreement for an indefinite term without a clause, the same test applies: it is in principle terminable, but reasonableness and fairness can require a weighty reason, a certain notice period or an offer of compensation. Investments the franchisee has not yet recouped and the time it needs to reorganise its business are relevant circumstances (HR 28 October 2011, ECLI:NL:HR:2011:BQ9854, para. 3.6.2).
When can you rescind a franchise agreement for breach?
Every failure to perform gives the other party the right to rescind (ontbinden) the agreement, unless the failure, given its special nature or minor importance, does not justify rescission with its consequences (Article 6:265(1) Dutch Civil Code).
Unless performance is permanently or temporarily impossible, the right to rescind only arises once the other party is in default (Article 6:265(2)). That usually requires a written notice of default giving a reasonable period to perform (Article 6:82(1)). Rescission takes place by a written declaration or through the court (Article 6:267). Many franchise agreements list grounds for immediate termination, such as non-payment of fees or breach of the formula standards. Read those clauses closely: they can change the statutory rules, but a court will interpret them in light of reasonableness and fairness.
An example. A franchisor of a coffee chain finds that a franchisee in Rotterdam repeatedly fails to meet the formula’s quality standards. After warnings and a written notice of default with a reasonable period, nothing improves. The franchisor can then rescind the agreement, provided the failure is serious enough to justify rescission. If it is not, the rescission has no effect, and a franchisor that then stops performing may itself be in breach. Our page on contract termination for breach under Dutch law explains the requirements in detail.
Is compensation due when a franchise agreement is terminated?
It can be, even when the notice itself is valid. If reasonableness and fairness require the terminating party to offer compensation and it does not, the notice is as a rule still valid, but the compensation can be claimed afterwards (ECLI:NL:HR:2024:1709, para. 3.3).
In Leen Bakker, the court of appeal weighed the long relationship, the franchisee’s expectations, investments that had not yet been written off, the fact that the franchisee was not to blame for the termination, and its dependent position (as summarised by the Hoge Raad in para. 2.5). The franchisor had given notice well ahead of the contractual period; that did not take away the claim. How much a longer notice period reduces the compensation depends on the circumstances (para. 4.2). Only in exceptional cases does a notice without a simultaneous offer fail altogether (para. 3.3).
This compensation is separate from the goodwill arrangement the Franchise Act requires. A franchisor planning to end a franchise relationship should therefore budget for both questions before sending the notice.
What happens to the lease, stock and customer data when a franchise ends?
The end of the franchise agreement does not by law end every related agreement. A sublease of the premises, supply agreements and financing each have their own terms, which you need to check and align.
In Leen Bakker, the court of appeal held that, in light of the valid termination of the franchise agreement, reasonableness and fairness meant the sublease of the store ended on the same date, and that the resulting damage could be taken into account in the compensation (as summarised in ECLI:NL:HR:2024:1709, para. 2.5). That outcome depended on the close link between the two agreements. Arrange in writing what happens to the store, remaining stock, signage and the formula’s intellectual property, customer data and staff, and when the franchisee must stop using the trade name and know-how.
What does the Dutch Franchise Act require on goodwill?
The franchise agreement itself must state how goodwill is determined and how it is compensated. The Act does not give the franchisee a general right to goodwill compensation on every termination (Article 7:920(1) Dutch Civil Code).
The agreement must in any event set out:
- how it is determined whether goodwill is present in the franchisee’s business, how large it is, and to what extent it is attributable to the franchisor;
- how goodwill reasonably attributable to the franchisee is compensated at the end of the agreement, if the franchisor takes over the franchisee’s business to continue it itself or to transfer it to a third party with whom it concludes a franchise agreement.
A clause contrary to Article 7:920 is void (Article 7:922). For a franchisor, this means the goodwill arrangement becomes relevant mainly when it wants to continue the location itself or with a new franchisee. For a franchisee, it means checking whether that situation applies and whether the contractual method was followed.
Is a post-term non-compete clause valid under Dutch franchise law?
Only if it meets all five statutory conditions. A clause restricting the franchisee’s activities after the agreement ends is valid only if it is in writing, covers competing goods or services, is strictly necessary to protect know-how, lasts no longer than one year and is geographically limited (Article 7:920(2)).
- It is laid down in writing.
- The restriction only concerns goods or services that compete with those covered by the franchise agreement.
- The restriction is strictly necessary to protect the know-how the franchisor transferred to the franchisee.
- It does not exceed one year after the end of the franchise agreement.
- Its geographical scope is not wider than the area in which the franchisee operated the formula under that agreement.
A non-compete that fails one of these conditions is not valid, and the parties cannot deviate from these rules to the detriment of a Dutch franchisee (Article 7:922).
Do these rules apply to franchise agreements concluded before 2021?
Yes, with a delay. Title 7.16 has applied since 1 January 2021. For franchise agreements concluded before that date, Articles 7:920 and 7:921 became applicable two years after the title entered into force (Article 209 Transitional Act for the new Dutch Civil Code (Overgangswet nieuw Burgerlijk Wetboek)).
Older franchise agreements therefore also need a goodwill arrangement and a non-compete that meets Article 7:920(2). Article 7:921, which requires franchisee consent for certain formula changes with financial consequences, applies to them in the same way. The Franchise Act entered into force on 1 January 2021 by Decree of 25 November 2020, Staatsblad 2020, 493. If you still work with an agreement from before 2021, check whether it was amended.
How do you prepare the termination of a franchise agreement?
Start with the contract and the numbers, not with the letter. Know your termination ground, your notice period, the goodwill and non-compete position and your compensation exposure before you send anything.
- Read the termination clause, the term, the notice requirements and the clauses on goodwill, non-compete, stock, premises and intellectual property.
- Check whether Title 7.16 applies in full (franchisee established in the Netherlands; agreement from before 2021 amended or not).
- Assess the franchisee’s position: duration, investments not yet recouped, dependence and expectations created. This determines the notice period and any compensation.
- If you rely on a breach, send a written notice of default first, unless default has already occurred without one.
- Send the notice or rescission in writing and keep proof of receipt (Article 3:37(3) Dutch Civil Code).
- Agree the wind-down in writing: last trading day, takeover of the location if any, goodwill calculation, stock, signage, customer data and staff.
A termination letter for a franchise agreement should state the agreement and the clause relied on, the termination date, any offer of compensation and the arrangements proposed for the wind-down. A sample letter rarely fits, because the notice period and the compensation depend on the facts of your relationship.
Frequently asked questions about terminating a franchise agreement under Dutch law
Can a franchisor terminate a franchise agreement in the Netherlands?
Yes, if the contract allows it or the agreement runs for an indefinite term. Reasonableness and fairness can require a weighty reason, a reasonable notice period or an offer of compensation (Article 6:248(1) Dutch Civil Code; HR 29 November 2024, ECLI:NL:HR:2024:1709).
Does a franchisor always have to pay goodwill compensation in the Netherlands?
No. The agreement must regulate how goodwill is determined and how goodwill attributable to the franchisee is compensated if the franchisor takes over the business to continue it or transfer it to a new franchisee (Article 7:920(1) Dutch Civil Code).
How long can a non-compete last after a Dutch franchise agreement ends?
At most one year after the end of the agreement, and only if the clause is in writing, covers competing goods or services, is strictly necessary to protect know-how and is limited to the area where the franchisee operated (Article 7:920(2) Dutch Civil Code).
Can a franchisee break a franchise agreement early?
Only if the contract allows early termination, the franchisor agrees, or the franchisor fails to perform in a way that justifies rescission after it is in default where default is required (Article 6:265 Dutch Civil Code). Otherwise, ending the agreement early can itself be a breach of contract.
Does Dutch franchise law apply if our contract chooses foreign law?
For franchisees established in the Netherlands, yes. Title 7.16 cannot be deviated from to their detriment, and a clause contrary to Article 7:920 is void, regardless of the law governing the agreement (Article 7:922 Dutch Civil Code).
Primary sources
Dutch statutes are only officially available in Dutch, on wetten.overheid.nl. Judgments can be found on rechtspraak.nl by their ECLI number.
- Dutch Civil Code (Burgerlijk Wetboek) Book 3: Article 3:37
- Dutch Civil Code Book 6: Article 6:82, Article 6:248, Article 6:265 and Article 6:267
- Dutch Civil Code Book 7, Title 16 (franchise): Article 7:911, Article 7:912, Article 7:920, Article 7:921 and Article 7:922
- Article 209 Transitional Act for the new Dutch Civil Code (Overgangswet nieuw Burgerlijk Wetboek); Decree of 25 November 2020, Staatsblad 2020, 493
- Hoge Raad 29 November 2024, ECLI:NL:HR:2024:1709 (Leen Bakker)
- Hoge Raad 2 February 2018, ECLI:NL:HR:2018:141 (Goglio/SMQ Group)
- Hoge Raad 28 October 2011, ECLI:NL:HR:2011:BQ9854
Need advice on ending a franchise relationship in the Netherlands?
Whether you are a franchisor restructuring your network or a franchisee who received a notice, the goodwill, non-compete and compensation questions are usually settled in the first round of letters. A Dutch lawyer can review the agreement against Title 7.16 and the case law, prepare or answer the notice and negotiate the exit. Read more about our work as a franchise agreement lawyer in the Netherlands, or see our page on disputes over a Dutch franchise agreement.
