A franchise agreement is the contract by which a franchisor grants a franchisee the right to operate a business under the franchisor’s formula, brand and system, against payment, and sets out what each side must do. In the Netherlands such an agreement is governed by the Dutch Franchise Act (Wet franchise), which has formed part of the Civil Code since 1 January 2021. The Act is mandatory law: any clause that departs from it to the disadvantage of a franchisee established in the Netherlands is void, whichever law the contract says applies.
What the Dutch Franchise Act requires
Before 2021 franchising in the Netherlands was governed by general contract law and a voluntary code. The Act replaced that with a statutory regime built on four blocks: a duty of disclosure before the contract is concluded, a standstill period during which the franchisee can take advice, a continuing duty of information and consultation during the relationship, and rules on what happens at the end. Running through all four is the overarching standard that franchisor and franchisee must behave towards one another as a good franchisor and a good franchisee.
Two features of the Act matter more than any individual rule. The first is that it is mandatory: the parties cannot contract out of it to the franchisee’s detriment where the franchisee operates in the Netherlands, and a choice of foreign law does not help a franchisor that wants to avoid it. The second is that it applies to the relationship rather than to the label: an agreement that in substance grants the right to operate a formula under the franchisor’s brand and instructions is a franchise agreement even if the parties called it something else, which matters for distribution and licensing structures that look franchise-like in practice.
Existing agreements were given a transitional period. The provisions on goodwill, the post-term restraint of competition, the consent requirement for changes to the formula and the derived formula only became binding on agreements already in force from 1 January 2023, so any contract concluded before 2021 and never amended should have been brought into line by then. A contract that still contains a two-year non-compete or no goodwill provision at all has not been updated. Our overview of franchising in the Netherlands and the legal framework in practice covers how the regime works across a network.
Who does what
The division of roles is the commercial heart of the arrangement and the source of most disputes. The franchisor supplies the formula: the brand and trademarks, the operating system and manual, the training, the know-how, and usually the purchasing arrangements and the network-wide marketing. The franchisee supplies the capital, runs the outlet, employs the staff, bears the commercial risk, and applies the formula as instructed.
| Party | Provides | Principal obligations |
|---|---|---|
| Franchisor | The formula: brand, system, know-how, training and support | Disclose fully before contracting, keep the franchisee informed during the term, provide the assistance promised, consult the network on changes, and act as a good franchisor. |
| Franchisee | Capital, premises, staff and local operation | Apply the formula and the quality standards, pay the agreed fees, share the information the franchisor needs, investigate the opportunity before signing, and act as a good franchisee. |
The franchisee remains an independent entrepreneur. That is the point of the model and it has consequences: the franchisee carries the trading risk, employs its own staff and answers for its own obligations. Where a franchisor exercises so much control that the relationship starts to resemble employment, or where the franchisee is in reality economically dependent in a way the contract does not reflect, the characterisation can be reopened, and that is worth checking before signing rather than afterwards.
Before you sign: disclosure and the standstill period
The Act front-loads protection into the period before signature, which is where a franchisee has the most leverage and the least information. The franchisor must provide the draft agreement and a defined set of information at least four weeks before the agreement is concluded, and during those four weeks it may not change the draft to the franchisee’s disadvantage, may not conclude the agreement, and may not require the franchisee to make any payment or investment relating to the intended franchise.
What must be disclosed
The information the franchisor owes is specific rather than promotional. It covers the draft agreement itself, including any related contracts the franchisee will be expected to sign such as a lease or a supply agreement; the fees, mark-ups and other financial contributions the franchisee will owe, and how they are calculated; the way the franchisor will use any marketing or advertising contributions; how and by whom the franchise formula may be changed and what consultation applies; the arrangements on competition after the agreement ends and on goodwill; the extent to which the franchisor may compete with the franchisee itself, including through other channels; how often and in what way the franchisor and franchisee will consult one another; the contact details enabling the franchisee to speak to the franchisee representative body or to other franchisees where these exist; and information about the franchisor’s financial position, so far as reasonably relevant to the franchisee.
Where the franchisor provides turnover or profit forecasts, it must also make clear on what basis they were prepared. Dutch case law is settled that a franchisor is not liable merely because a forecast proves wrong, but it is liable where it knew or ought to have known that the underlying figures contained errors and did not say so. The practical consequence for a franchisee is that a forecast handed over without any explanation of its assumptions is a document to be tested, not relied on, and the practical consequence for a franchisor is that it should never pass on a projection it has not checked.
Using the standstill period
Four weeks is not long. Spend the first days getting the documents reviewed by a lawyer who does franchise work, because the clauses that will cost money later are the ones that look standard. In parallel, take the financial projections to your own accountant and rebuild them from your own cost base: rent, staff, energy, expected footfall in your location. Speak to existing franchisees, including any who have left the network, and ask about the support actually delivered rather than the support described. Check the franchisor’s filed accounts and the trade register. And form a view on the two questions the documents rarely answer directly: what happens if the formula is changed in a way you dislike, and what you are left with when the contract ends.
The franchisee also has a duty under the Act to inform itself, and to provide the franchisor with information about its own position that is reasonably relevant. A franchisee that signs without doing anything with the four weeks cannot later complain that it was misled about something the documents disclosed. If, at the end of the standstill period, essential information is still missing, ask for it in writing and let the clock start again rather than signing on the assumption that it will be sorted out afterwards.
The clauses that decide the deal
Beyond the statutory minimum, the value of a franchise agreement lies in a handful of clauses. Read these first.
Grant of rights and the operations manual
The grant clause states what you may use and how: the trademarks, the trade name, the software, the recipes or methods, and the operating system. Check that the franchisor actually owns or is entitled to license the trademarks, that the licence covers the whole term, and what happens to the licence if the franchisor loses or assigns the rights. Check also what happens to the operations manual, since most agreements make the manual binding and allow the franchisor to amend it unilaterally; a manual that can be rewritten at will is a mechanism for changing your obligations without changing the contract, and that is exactly the situation the Act’s consent rules are meant to control.
Territory and channel
An exclusive territory means the franchisor undertakes not to open, and not to allow another franchisee to open, an outlet in your area. A non-exclusive territory gives no such protection. What matters as much as the label is the definition: postcodes, a radius, or named streets, and whether the exclusivity covers only physical outlets or also online sales, delivery platforms, wholesale, and non-traditional locations such as stations, airports and petrol stations. Carve-outs for those channels are common and they can hollow out an exclusivity clause entirely. If the franchisor sells to customers in your area through its own webshop, ask in writing whether you receive any part of that turnover.
Fees
Franchise systems typically combine an entry fee paid on signature for admission to the network and the initial training, a continuing fee for the use of the formula and the ongoing support, and a contribution to network marketing. The continuing fee and the marketing contribution are usually calculated as a percentage of turnover, occasionally as a fixed amount. The percentages are a matter for negotiation and vary widely between sectors, so treat any figure as specific to the system in front of you rather than as a norm.
What deserves closer attention is everything around the headline fees: whether the marketing contribution is accounted for and how, whether purchasing is obligatory and at what margin, mandatory software or technology charges, fees for training, audits and conferences, and refurbishment obligations that fall due at intervals or on renewal. Add all of it to the model before you decide whether the business works, and make sure the agreement states how and when the fees may be increased.
Term, renewal and refurbishment
The Act does not prescribe a duration. Terms are commonly fixed for a number of years matched to the payback on the investment and to the lease of the premises, which should be checked against one another; a five-year franchise term with a ten-year lease leaves the franchisee exposed. Renewal is rarely automatic. Look at the conditions, the notice period for requesting renewal, whether renewal is on the then-current form of agreement with different fees, and whether renewal is conditional on a refurbishment at your expense. A refurbishment obligation timed to fall shortly before the end of a term deserves particular scrutiny.
Changing the formula: the franchisee’s consent right
One of the most significant innovations of the Act is that a franchisor can no longer change the formula unilaterally without limit. Where a change to the franchise formula, or the operation of a derived formula by the franchisor, requires the franchisee to invest, or reduces its turnover, or otherwise imposes costs on it, the franchisor needs consent before it may proceed. Whose consent depends on how the agreement is drafted: either the consent of the majority of the franchisees operating that formula in the Netherlands, or the consent of each individual franchisee affected.
The agreement must set the threshold above which that consent is required, expressed in financial terms. Below the threshold the franchisor may act; above it, it may not without consent. A franchise agreement that contains no threshold at all is defective, and a threshold set so high that nothing ever crosses it is open to challenge as inconsistent with the Act and with the duty of good franchisorship.
The derived formula deserves a mention of its own. It is a formula operated by the franchisor, in whole or in part under a different name, which sells goods or services similar to those of the franchise and competes with the franchisee’s outlet. Discount lines, delivery-only brands, wholesale channels and online-only concepts are the practical examples. Under the Act the franchisor cannot simply launch one alongside the network where it harms franchisees over the agreed threshold; it needs consent on the same basis.
Alongside the consent right sits a duty of consultation. The Act requires franchisor and franchisees to consult one another at least once a year, and requires the franchisor to give timely notice of intended changes and of any investment it will demand. A network with an active franchisee council is materially better placed than one without, and the existence and powers of such a council are worth asking about before joining.
Competition law limits on a franchise agreement
A franchise agreement is an agreement between independent undertakings at different levels of the supply chain, and European and Dutch competition law therefore applies to it alongside the Franchise Act. The Vertical Block Exemption Regulation and the accompanying guidelines exempt most franchise arrangements where the market shares of both parties stay below the threshold set in the Regulation, provided the agreement contains no hardcore restriction.
Three limits matter in practice. The franchisor may recommend a resale price and may set a maximum price, but it may not fix the price at which the franchisee sells, and pressure or incentives that make a recommended price effectively binding are treated the same way. The franchisor may allocate an exclusive territory and protect it against active selling by other franchisees, but restrictions on passive selling, meaning responses to unsolicited customer orders, and general bans on internet selling are treated as serious restrictions. And a non-compete obligation during the term is exempted only up to the period set in the Regulation, subject to the specific treatment of restrictions that are necessary to protect the know-how transferred by the franchisor.
Infringement is expensive: agreements or clauses caught by the prohibition are void, the Netherlands Authority for Consumers and Markets can impose fines, and affected parties can claim damages. Where a network operates across several countries, or where market shares are significant, the competition analysis should be done at the drafting stage rather than after a complaint. Our guide to the different types of commercial agreement sets out how franchising compares with distribution and agency, which are treated differently under the same rules.
Ending the agreement
Franchise relationships end in one of three ways: the term expires and is not renewed, one party terminates for breach, or the parties agree to part. Each has its own requirements.
Termination for breach follows the ordinary rules of Dutch contract law. Unless the contract provides otherwise, the party in breach must first be given written notice of default allowing a reasonable period to perform, and only if the breach persists does the right to rescind arise. Franchise agreements often provide for immediate termination on defined events, such as failure to pay after a grace period, loss of a licence or permit, or insolvency; those clauses are generally valid, but they are read strictly, and a franchisor that terminates on a technicality after tolerating the same conduct for years may find itself confronted with its duty to act as a good franchisor.
Non-renewal is not a free choice either. Where the agreement runs for a fixed term and simply expires, the franchisor is in principle entitled not to renew, but the requirements of reasonableness and fairness, and the duty of good franchisorship, can require an adequate notice period, a genuine reason, or in some circumstances compensation, particularly where the franchisee has made investments at the franchisor’s instigation that it has not yet recovered. The longer the relationship and the larger the sunk investment, the heavier those requirements become.
The post-term non-compete
A restraint on competition after the end of the agreement is only valid if it satisfies each of the statutory conditions cumulatively. It must be recorded in writing. It must relate to goods or services that compete with those covered by the franchise agreement. It must be indispensable to protect the know-how transferred by the franchisor. It must be limited to the territory in which the franchisee operated under the agreement. And it may not run for longer than one year after the agreement ends. A clause that fails any one of these is unenforceable in that respect, and clauses drafted before the Act frequently do fail, most often on duration or on geographic scope.
Goodwill
The Act does not create an automatic right to a goodwill payment. What it does is oblige the parties to regulate the question in the agreement itself: the agreement must determine whether goodwill is present in the business, how its size is established, and to what extent it is attributable to the franchisee, and it must provide that goodwill attributable to the franchisee is paid to the franchisee where the franchisor takes over the business in order to continue it itself or to have it continued by another franchisee. An agreement silent on goodwill does not comply. For a franchisee, this is the clause to negotiate at the start, because the valuation method agreed on day one determines what the business is worth on the day you leave.
What survives the end
Ending the operation does not end the obligations. The franchisee normally has to cease all use of the brand, remove signage and de-identify the premises, return the operations manual and any confidential material, transfer or delete the customer data held under the formula, hand over telephone numbers and domain names where the contract requires it, and settle outstanding fees. Confidentiality obligations continue indefinitely in most agreements, and unlike the non-compete they are not capped at one year. Where the premises are leased from the franchisor or through it, the lease and the franchise agreement usually stand or fall together, and the interaction between the two should be checked before signing, not on exit.
Disputes, insolvency and enforcement
Most franchise disputes concern the same handful of subjects: turnover forecasts that were never achievable, support that was promised and not delivered, a change to the formula imposed without consent, encroachment on an exclusive territory through a new outlet or an online channel, fee increases, and the terms of exit. The pattern of the dispute usually determines the remedy: a failure of support is a breach to be met with a notice of default; a formula change imposed without the required consent can be resisted on the basis of the Act; a misleading pre-contractual picture may found a claim based on mistake or on unlawful conduct, and in a serious case can lead to annulment of the contract.
Well-drafted agreements provide for escalation: direct negotiation between named representatives with a deadline, then mediation, then arbitration or the courts. The staged clause works only if each step has a time limit; without one it becomes a device for delay. Where the relationship is worth saving, mediation genuinely helps, because most of these disputes are about the operation of a continuing relationship rather than a single event. Our guide to resolving business disputes in the Netherlands sets out the routes and what each costs in time.
Insolvency on either side changes the analysis. If the franchisor is declared bankrupt, a trustee takes control of the estate and decides whether to continue or to sell the network; the trustee is not obliged to perform, and the franchisee’s remedy is a claim in the estate, which is usually worth little. A sale of the formula to a new owner leaves the existing agreements in place, so franchisees generally continue on the same terms with a different counterparty. Because these outcomes are largely outside the franchisee’s control, the franchisor’s financial position is one of the most important things to examine during the standstill period, and our guide on the bankruptcy of a contract partner explains what a counterparty can and cannot do.
What to check before you sign
Reduce the review to the questions that determine whether the business works and what you keep at the end. Does the disclosure package contain everything the Act requires, and did the four weeks genuinely run? Do the projections survive contact with your own cost base? Is the territory exclusive, and does that exclusivity extend to online and delivery channels? What is the total annual cost of being in the network, including purchasing margins, technology and refurbishment? What threshold triggers your consent right, and who holds it? What does the goodwill clause actually promise, and how is the amount calculated? Is the post-term restraint within the statutory limits? And do the franchise term and the lease term match?
Franchisors should run the same list from the other side. An agreement drafted before 2021, or one carried over from another jurisdiction, is unlikely to comply with the Act, and non-compliance is not a technicality: clauses that conflict with the mandatory rules simply do not bind, which is usually discovered at the moment the franchisor most needs them.
Law & More advises franchisors and franchisees in the Netherlands on drafting and reviewing the franchise agreement and the disclosure package, on consent rights and formula changes, on territory and competition law, and on disputes about support, goodwill and post-term restraints. If you are considering a franchise, renewing one, or dealing with a conflict inside a network, our lawyers will review the documents and set out the options. Please contact us to discuss your situation, or read our Dutch corporate law guides. Related contract structures are covered in our guides to the participation agreement, the IT services agreement and international commercial contracts.
Common questions about Dutch franchise agreements
Can I negotiate my Franchise agreement in the Netherlands?
Yes, you can—but you have to be smart about it. Think of it this way: the core elements that make the brand what it is, like the system-wide fees, the secret sauce recipe, or the specific operational methods, are almost always set in stone. The franchisor's number one priority is making sure every location delivers the exact same customer experience. Uniformity is king.
However, that doesn't mean the entire document is non-negotiable. Certain clauses are unique to your specific situation and location, and that's where you have some wiggle room.
This is where you should focus your energy:
- Exclusive Territory Boundaries: Can the map be drawn more favourably for you? Maybe it makes sense to include that new residential area that’s being developed nearby.
- Required Store Updates: Can you agree on a more flexible schedule for store remodels or technology upgrades? This can make a huge difference to your cash flow.
- Local Marketing Contributions: Is there any flexibility in how your local marketing budget is used? You know your community best, so you might have better ideas on how to reach them.
The law gives you a brilliant window of opportunity for this: the four-week standstill period. This is your time to get a lawyer to go through the agreement with a fine-tooth comb and pinpoint these negotiation points, all without any pressure from the franchisor.
What is goodwill compensation under the Dutch franchise Act?
The Dutch Franchise Act requires every franchise agreement to state whether goodwill is present, how its size is established and to what extent it is attributable to the franchisee; the Act does not itself fix an amount. In simple terms, it's a payment you might be entitled to from the franchisor when your agreement comes to an end. It’s the law's way of recognising the value you've personally built in your local market.
Imagine spending a decade running a successful shop. You’ve built up a loyal customer base and a fantastic reputation in your town. That value—the "goodwill"—is a real, tangible asset. Now, if the franchisor decides not to renew your contract but takes over the location to run it themselves, they're stepping right into the successful business you built.
Goodwill compensation ensures you get paid for the customer base and reputation you have to leave behind, which the franchisor can then immediately profit from. It stops a franchisor from simply waiting for you to do all the hard work and then taking over without paying for that value.
Figuring out if you can claim it and how much it’s worth can get complicated. This is one of the most important things to discuss with a specialised franchise lawyer right at the beginning, when you first review the agreement.
What happens if my franchisor goes bankrupt?
A franchisor going bankrupt is one of the biggest risks you face, and it can throw everything into chaos. When a Dutch company goes into bankruptcy, the court appoints a trustee (curator) who takes total control of the company and all its assets.
The trustee has one main legal duty: to get as much money as possible for the company's creditors. That single goal will shape everything that comes next, leading to a few potential outcomes:
- Sale of the Franchise System: The most likely scenario is that the trustee sells the entire franchise network to another company. If that happens, this new company becomes your new franchisor, and you’ll continue to be bound by your existing franchise agreement.
- Termination of Agreements: In a worse scenario, the trustee might decide the best way to raise cash is to liquidate everything. This could involve trying to terminate all existing franchise agreements.
Your rights in this situation really depend on the specific insolvency clauses in your contract and the decisions the trustee makes. It’s a serious risk, and it underlines why doing your homework on the franchisor's financial health before you sign anything is so incredibly important.
Are there restrictions on selling my Franchise?
Yes, absolutely. You can't just sell your franchised business to anyone who makes an offer. Your franchise agreement will have very specific clauses covering the sale process, and the franchisor always has the final say.
This isn't just the franchisor being difficult; it's about protecting the brand. They have a vital interest in making sure that any new owner joining the network meets the same financial, operational, and ethical standards as everyone else.
The process usually involves a "right of first refusal." This gives the franchisor the first chance to buy your business themselves, for the same price another buyer has offered. If they pass on that opportunity, they still have the right to approve or reject your proposed buyer. They can’t unreasonably say no to a qualified person, but that person must meet all their standard requirements. The entire transfer process, including any fees you’ll have to pay, will be spelled out clearly in your agreement.
