Article Franchise+: “5 tips for starting franchisees” – mr. RCWL Albers – dated June 30, 2021

Choosing a franchise can be attractive for you as a (starting) entrepreneur. You can use a proven and well thought-out concept and matters such as house style, logistics, supplies and assortment have already been arranged for you. With more than 900 franchise formulas in various sectors such as services, catering and retail (food and non-food), there is also a wide choice of numerous concepts.

If you are considering franchising, there is an enormous amount of information available about franchising in addition to these options. Not least because of the recently introduced Franchise Act, which aims to improve the position of franchisees.

For aspiring franchisees, the sheer amount of information can be overwhelming. The tips below can help you in your search.

1. Choose the type of formula that suits you

When choosing a formula, it is important to realize that there are huge differences between the different formulas. If you opt for a ‘soft franchise’ formula, you usually have greater entrepreneurial freedom. For example, depending on the formula, you can decide for yourself where you purchase your products or in some cases you are free to set up your location differently or make changes to your range. On the other hand, more matters to you as an entrepreneur and you can expect less support from the franchisor.

In ‘hard franchise’ formulas, things are much more tightly regulated. For example, you often have to deal with a composite assortment in which it is determined exactly how many slices of pickles a burger should contain. This usually also involves a mandatory purchase from the franchisor or designated suppliers. So there is less entrepreneurial freedom, but on the other hand you can expect more from the support of the franchisor.

2. Do thorough research

Explore the revenue model, the history and the potential of a formula, among other things, and do not be guided solely by the information provided to you, but also do your own research.

Pursuant to the Franchise Act, a franchisor is obliged to provide you with all information that may be relevant to you. This often results in an extensive information package that is contained in a pre-contractual information document (PID).

On the other hand, you are also legally obliged to do your own research and avoid entering into the franchise agreement based on incorrect assumptions. It is always wise not only to study the franchisor’s information, but also to conduct independent research. For example, you can contact some existing franchisees and/or the franchisee representative. Much larger formulas often have a franchise council or franchisees’ association that has a lot of information and can put you in touch with other franchisees if necessary.

3. take your time

You have a statutory cooling-off period of (at least) four weeks. This period only starts after the franchisor has provided you with all relevant information, including the draft of the franchise agreement and any other agreements to be concluded, but also information about fees and investments to be paid by you. Make good use of this (minimum) term.

You may not be obliged to enter into an agreement or make any payments within this period. You must therefore be completely free to waive the franchisee status. You may, however, be required to enter into a non-disclosure agreement. After all, a franchisor must be able to rely on you to handle the confidential information obtained prudently.

4. Also look further

You probably don’t immediately think of this when looking for a franchise, but it is wise to also consider what your options are if you choose to stop with the franchise in some time. Agreements are often included about the sale of the company, but there may also be a non-competition clause that applies after the franchise agreement has ended. Such a clause must meet the requirements of the Franchise Act. For example, it may not last longer than one year and it must be limited to the (former) area of ​​work of the franchisee.

Since the introduction of the Franchise Act, it is also mandatory to include a goodwill arrangement for the situation where you stop as a franchisee, but do not have a buyer for your establishment. In that case, if the franchisor chooses to continue operations at your former location, there may be a mandatory goodwill fee (if any). It is therefore advisable to familiarize yourself with this arrangement before concluding the franchise agreement.

5. When in doubt, do not overtake

Due to the multitude and variety of all the information coming your way, you run the risk of going on the adventure without knowing all the consequences. Therefore, consult experts in good time who can guide you and, if necessary, protect you. You can often go for a no-obligation introduction that will always make you wiser.