The franchise agreement is the agreement by which the franchisor grants a franchisee the right and obligation, for a fee, to exploit a franchise formula in the manner designated by the franchisor for the production or sale of goods or the provision of services.
In this title:
franchise formula: operational, commercial and organizational formula for the production or sale of goods or the provision of services, which determines a uniform identity and image of the franchise companies within the chain where this formula is applied, and which in any case includes:
a trademark, model or trade name, house style or drawing; and
know-how, being a set of practical information not protected by an intellectual property right, resulting from the franchisor’s experience and from the investigations carried out by him, which information is secret, material and identified;
derived formula: operational, commercial and organizational formula that
is decisive for a uniform identity and image of the companies where this formula is applied;
corresponds to a franchise formula in one or more distinctive features known to the public; and that
is used directly or via third parties by a franchisor for the production or sale of goods or the provision of services that are wholly or largely the same as the goods or services covered by the franchise formula referred to under 2°;
franchisor: natural person or legal person who is entitled to or entitled to use a franchise formula and grants others the right to exploit this formula in the exercise of his profession or business;
franchisee: natural person or legal entity who operates a franchise formula for his own account and risk in the exercise of his profession or business.
The intended franchisee will provide the franchisor with timely information about his financial position, insofar as this is reasonably important for the conclusion of the franchise agreement.
The franchisor will timely provide the intended franchisee with:
the draft franchise agreement, including appendices;
a representation of the content and purport of regulations regarding fees, surcharges or other financial contributions to be paid by the franchisee or regarding the investments required of him;
the manner in which and the frequency with which the consultation between the franchisor and the franchisees takes place, as well as, if any, the contact details of the representative body of the franchisees;
the extent to which and the manner in which the franchisor, whether or not via a derivative formula, can compete with the franchisee; and
the extent to which, the frequency with which and the manner in which the franchisee can take note of turnover-related data that concern the franchisee or are important for its business operations.
In addition, the franchisor shall provide the intended franchisee with the following information in good time, insofar as this information is available to it, to a subsidiary as referred to in Article 24a of Book 2, or to an affiliated group company as referred to in Article 24b of Book 2, and is reasonably relevant to the conclusion of the franchise agreement:
information about his financial position; and
financial data relating to the intended location of the franchise company, or failing that, financial data of one or more company or companies considered comparable by the franchisor, with the franchisor making clear on what grounds it considers them comparable.
The franchisor provides the intended franchisee with all other information of which it knows or can reasonably suspect that it is important for the conclusion of the franchise agreement.
The provision of the information, referred to in Article 913, paragraphs 2, 3 and 4, takes place at least four weeks before the conclusion of the franchise agreement.
During this period, the franchisor shall not:
amendment of the draft franchise agreement, unless such amendment is for the benefit of the franchisee;
the conclusion of the franchise agreement or any agreement deemed to be inextricably linked thereto with the franchisee, with the exception of a confidentiality agreement by the intended franchisee regarding the confidential information provided by the franchisor with a view to entering into the franchise agreement; or
encouraging the intended franchisee to make payments or investments in connection with the franchise agreement yet to be concluded.
The first and second paragraph do not apply with regard to:
the conclusion of a subsequent franchise agreement between the same parties regarding the same franchise formula;
the conclusion of a subsequent franchise agreement as referred to under a, if this is concluded between the same franchisor and a subsidiary as referred to in Article 24a of Book 2 of the franchisee or an affiliated group company as referred to in Article 24b of Book 2.
Within the limits of reasonableness and fairness, the intended franchisee will take the necessary measures to prevent him from concluding the franchise agreement under the influence of incorrect assumptions.
The franchisor shall timely provide the franchisee with:
information about intended changes to the agreement;
information about investments it requires from the franchisee;
a notification of a decision to use, directly by the franchisor or through a third party, a derivative formula, including an explanation of the content and purport of the relevant derivative formula; and
other information of which the franchisor knows or can reasonably suspect that it is important with a view to the execution of the franchise agreement by the franchisee.
The franchisor will inform the franchisee annually to what extent the surcharges or other financial contributions made by the franchisee in the previous financial year in accordance with the franchisor’s requirements cover the costs or investments that the franchisor intends or has intended to cover with these contributions.
Consultations between the franchisor and the franchisee take place at least once a year.
The provision of the information referred to in Articles 913 and 916 takes place in a manner that makes this information accessible unaltered for future consultation during a period that is geared to the purpose for which the information was provided.
The information provided by the franchisor pursuant to Sections 913 and 916 is formulated and formatted in such a way that an intended franchisee can reasonably make an informed decision about entering into the franchise agreement, or a franchisee can determine whether and to what extent it is necessary to adjust its business operations or to take factual measures.
The franchisor provides the franchisee with the assistance and commercial and technical support that may reasonably be expected in relation to the nature and purport of the franchise formula with a view to the exploitation of the franchise formula by the franchisee.
If the franchisee deems a certain form of assistance or support as referred to in the first paragraph necessary, he will notify the franchisor of this and the franchisor and the franchisee will consult each other about this.
whether goodwill exists in the franchisee’s business;
if so, what size is it; and
to what extent this can be attributed to the franchisor;
how goodwill that can reasonably be attributed to the franchisee will be reimbursed to the franchisee upon termination of the franchise agreement, if the franchisor takes over the franchise business of the franchisee in question to continue this business independently, or transfer it to a third party with whom the franchisor enters into a franchise agreement.
A clause limiting the franchisee’s ability to operate in a certain manner after the end of the franchise agreement is only valid if:
it is in writing;
the restriction on business only relates to goods or services that compete with the goods or services covered by the franchise agreement;
the restriction is indispensable to protect the know-how transferred from the franchisor to the franchisee;
it does not exceed one year after the end of the franchise agreement; and
the geographic scope is not wider than the area within which the franchisee has operated the franchise formula under the relevant franchise agreement.
If the franchisor intends to implement a change in the franchise formula using a provision included in the franchise agreement or intends to have a derived formula exploited directly or through third parties without amending the franchise agreement for this purpose, and the franchisor, with a view to this intention:
requires an investment from the franchisee;
introduces or changes an obligation of the franchisee to pay a fee, surcharge or other financial contribution, other than the investment referred to in part a, to the detriment of the franchisee;
requires the franchisee to bear other costs; or
can reasonably foresee that the implementation of the intention will lead to a loss of turnover of the franchisee’s business, and this investment, compensation, surcharge or other financial contribution or expected loss of turnover exceeds a level specified in the franchise agreement;
the franchisor needs the prior consent of:
a majority of the franchisees established in the Netherlands with whom the franchisor has concluded a franchise agreement regarding the franchise formula; or
each of the franchisees established in the Netherlands who are affected in the manner referred to under a, b, c or d by the franchisor’s intention.
If the determination of the level, referred to in the first paragraph, is not included in the franchise agreement, the prior consent referred to in the first paragraph is always required, regardless of the size of the required investment, the financial contribution or the costs or the loss of turnover, as referred to in paragraph 1. the first paragraph, under a, b, c and d respectively.
With regard to franchisees established in the Netherlands, the provisions of this Title cannot be deviated from to the detriment of them and that a stipulation contrary to Article 920 is null and void, regardless of the law governing the franchise agreement.
The main official legislative publications regarding the Franchise Act are as follows:
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