Franchising in the Netherlands is regulated by the Wet franchise, the Dutch Franchise Act, which has been part of the Civil Code since 1 January 2021 as Title 16 of Book 7 (art. 7:911 to 7:922 BW). It imposes a pre-contractual disclosure duty, a four-week standstill period before signing, a consent right for franchisees when the formula changes, and mandatory rules on goodwill and post-term non-compete clauses. These provisions are mandatory law: they cannot be contracted away to the detriment of a franchisee established in the Netherlands, whatever law the agreement chooses (art. 7:922 BW).
That last point is what makes the Dutch regime unusual in Europe. An American or German franchisor that signs a New York-law agreement with a franchisee operating a branch in Rotterdam is still bound by the Franchise Act for that relationship. Conversely, a franchisor established in the Netherlands that contracts with a franchisee operating abroad can deviate from the Act, even under Dutch law. Everything below therefore starts from the same question: where does the franchisee actually operate.
This article sets out what the Act requires in practice: what must be disclosed and when, what the agreement itself must contain, how far a franchisor may change the formula, what competition law permits, and how the relationship can be ended. It is written for franchisors entering the Dutch market and for franchisees assessing an offer. For the wider commercial context, see our guide to Dutch business law and our overview of types of commercial agreements under Dutch law.
What counts as a franchise agreement under Dutch law
Art. 7:911 BW defines a franchise agreement as an agreement under which a franchisor grants a franchisee, against payment, the right and the obligation to operate a franchise formula in the manner designated by the franchisor, for the production or sale of goods or the provision of services. The franchise formula itself is defined as an operational concept for the uniform production or sale of goods or services, which in any event includes a trade mark, model or trade name, and know-how that is relevant to the operation of the formula.
Three features follow from that definition and they decide whether the Act applies at all. The franchisee operates for its own account and risk as an independent entrepreneur, not as an employee or an agent. There is a uniform formula, imposed by the franchisor, which the franchisee is obliged to follow. And the franchisee pays for the right to use it, whether as an entry fee, a royalty, a marketing contribution or a mark-up on goods it is required to purchase.
The label the parties use is not decisive. A contract called a licence, a partner agreement or a distribution arrangement will still be a franchise agreement if it has these features, and the mandatory rules will apply to it. That distinction matters because neighbouring contract types are governed by very different regimes: a commercial agency agreement carries its own statutory protections, including a client indemnity on termination, and a distribution agreement is largely governed by general contract law. Our article on what a general partnership is explains a further structure that franchisees sometimes use between themselves.
Scope, mandatory effect and the transitional period
The Act protects franchisees established in the Netherlands. Its provisions cannot be waived to their detriment, and a choice of foreign law or of a foreign forum does not displace them; a Dutch court or an arbitrator will apply them to a Dutch-based branch regardless. Where the franchisee operates outside the Netherlands, the parties may deviate, even if they have chosen Dutch law to govern the contract.
Agreements that already existed on 1 January 2021 were given two years to be brought into line with the rules on goodwill, post-term non-compete clauses and the franchisee consent right. That transitional period expired on 1 January 2023. Every franchise agreement in force in the Netherlands is therefore now fully subject to the Act, and a clause that was drafted before 2021 and never revisited is very likely to be unenforceable in part. Reviewing legacy agreements is not an optional housekeeping exercise.
There is no franchise regulator in the Netherlands and no register of franchise agreements. Compliance is enforced by the parties themselves through the civil courts, which means the Act works through the contract and through general contract law rather than through supervision. The code of the Nederlandse Franchise Vereniging is voluntary self-regulation and binds only its members; it is not a source of statutory obligation.
Before signing: disclosure and the four-week standstill
The heaviest obligations in the Act fall in the period before the contract is signed. Under art. 7:913 BW the franchisor must give the prospective franchisee, in good time, the information it needs to decide whether to enter the relationship. The provision lists what must be handed over, and in practice this is bundled into a pre-contractual information document, widely referred to as the PID.
The document must in any event include:
- the draft franchise agreement, including all annexes and the operations manual to the extent it forms part of the contract;
- information about the fees, mark-ups and other financial contributions the franchisee will owe, and about the way in which they are set;
- information on how and how often the franchisor and franchisees consult one another, and on the contact point within the franchisor organisation;
- the extent to which the franchisor may itself compete with the franchisee, directly or through a derivative formula;
- information about the financial position of the franchisor, so far as it is reasonably relevant to the franchisee;
- any investment the franchisee will be expected to make.
Once that information has been provided, art. 7:914 BW imposes a standstill of at least four weeks before the agreement may be concluded. During those four weeks the franchisor may not change the draft to the detriment of the franchisee, may not ask for any payment or investment in anticipation of signing, and may not press the franchisee to commit. The purpose is to give the prospective franchisee an undisturbed period to have the figures checked, take advice and negotiate. A franchisor who shortens the period, or who quietly amends the draft during it, exposes the resulting contract to attack.
The franchisee also has homework
Disclosure does not shift the entire risk to the franchisor. The Act requires the prospective franchisee to inform itself as well: to study what it receives, to have the financial projections examined by its own accountant, and to disclose its own financial position where that is relevant. It must also keep the information it receives confidential. A franchisee who signs without reading the manual and later complains that the formula was more prescriptive than expected will get little sympathy.
Nor does the Act guarantee the accuracy of forecasts. Dutch case law on pre-contractual liability in franchising, developed well before 2021, holds a franchisor liable where it supplies a prognosis it knew or should have known to be unsound, or where it makes an error in a forecast it prepared itself. The Act reinforces that by requiring the underlying data to be shared. Where a location-specific turnover forecast is provided, it should be traceable to real assumptions and to comparable outlets, and a franchisee is entitled to ask for that underlying material. Careful drafting of what is and is not warranted belongs in the agreement itself; see our article on drafting Dutch agreements.
What the franchise agreement itself must contain
Dutch law leaves the commercial terms of a franchise agreement largely to the parties. There is no statutory minimum or maximum term, no prescribed fee structure and no compulsory renewal right. Two subjects, however, must be dealt with in the contract itself, and a franchise agreement that is silent on them does not meet the statutory standard.
Goodwill
Art. 7:920 BW requires the agreement to state whether goodwill is present in the franchisee business, how large it is, and to what extent it is attributable to the franchisor. It must also set out how goodwill built up by the franchisee is to be compensated if the franchisor takes over the business at the end of the relationship in order to continue it itself or through another franchisee. The parties are free to agree the method of calculation, but they are not free to ignore the subject.
The distinction between formula goodwill and local goodwill drives the outcome. In a tightly controlled formula, where the franchisor determines the assortment, the pricing framework, the layout and the marketing, the customer is loyal to the brand rather than to the operator, and the franchisee contribution to goodwill will be modest. In a looser formula, where the franchisee builds its own client base and local reputation, the reverse is true. A provision stating flatly that no goodwill compensation will ever be payable is risky: it must at least be reasoned, and it can be tested against the standard of good franchisor conduct.
Non-compete clauses
During the term of the agreement a non-compete obligation is permitted, provided it is agreed in writing. After the agreement ends, art. 7:920 BW makes a post-term restriction valid only if four conditions are met cumulatively:
- it is laid down in writing;
- it relates to goods or services that compete with those covered by the franchise agreement;
- it is indispensable to protect the know-how transferred by the franchisor to the franchisee;
- it does not last longer than one year after the end of the agreement and is limited to the geographical area in which the franchisee operated under the agreement.
A two-year restriction, or one covering the whole of the Netherlands when the franchisee ran a single outlet in Utrecht, therefore fails. Franchise non-compete clauses should not be confused with the rules for employees, which follow a separate regime and their own reasonableness test; see our article on non-compete clauses under Dutch employment law.
The clauses that are not regulated but decide the dispute
Beyond those two subjects, the terms that generate litigation are the ordinary commercial ones: the duration and any renewal mechanism, the fee structure and how it may be adjusted, purchasing obligations and permitted suppliers, minimum performance targets, the territory, the conditions for transfer of the business to a buyer, and the consequences of default. Automatic renewal clauses in particular need clear notice periods, because an ambiguous clause tends to be construed against the party that drafted it. Where the franchisee has weak bargaining power, penalty clauses and wide liability exclusions can be moderated by the court, and the reasoning developed in consumer protection in contracts is sometimes applied by analogy to small franchisees. Standard business contract hygiene applies with full force here.
Changing the formula: consent rights and the duty to consult
The consent right of art. 7:921 BW is the provision franchisors most often overlook, and it is the one with the sharpest teeth. A franchisor needs the prior consent of its franchisees before it changes the franchise formula, or before it operates a derivative formula, where doing so would require the franchisee to make an investment, would impose additional costs, or would reduce its turnover.
Whose consent depends on how the agreement is drafted. The parties may agree a financial threshold below which no consent is required. Above it, or where no threshold has been agreed at all, the franchisor needs the consent of the majority of the franchisees established in the Netherlands, or of each individual franchisee affected by the change. A network-wide refit of store interiors, a new point-of-sale system that the franchisee must buy, a change in the assortment that requires new equipment, or the launch of a similar formula that competes with the franchisee in its own area all fall within this rule.
A derivative formula deserves separate attention because it is where franchisors get caught. If a franchisor acquires or launches a second concept that consumers perceive as strongly similar to the existing one, because it uses comparable branding, presentation or product range, it will be treated as a derivative formula. Rolling it out into a territory where an existing franchisee operates, or shifting sales to it, then requires consent rather than mere notification.
Good franchisor, good franchisee
Art. 7:912 BW obliges both parties to behave towards each other as a good franchisor and a good franchisee. This is more than a decorative preamble. It is the standard against which the court measures the exercise of discretionary contractual powers: a unilateral amendment clause, a decision not to renew, the imposition of a new supplier, the setting of targets. Together with the general duty of reasonableness and fairness, it allows a court to set aside or moderate a term that is being used oppressively, even where the wording of the contract permits it.
Two concrete duties run alongside it throughout the relationship. The franchisor must inform franchisees in good time of matters that affect them, including intended changes to the formula, investments it expects them to make, and its plans to compete in their area; where it charges through costs, it must be able to show and substantiate that those costs were actually incurred. And the franchisor must consult its franchisees at least once a year, in the manner set out in the agreement. Franchisees who are asked to approve a change should ensure the consultation is documented, because the record of what was discussed is often the decisive evidence when the change is later disputed.
Competition law limits on a franchise network
A franchise agreement is a vertical agreement between undertakings at different levels of the supply chain, and it is therefore caught in principle by art. 101 of the Treaty on the Functioning of the European Union and by art. 6 of the Mededingingswet, the Dutch Competition Act. In practice it escapes the prohibition through the block exemption for vertical agreements, Regulation (EU) 2022/720, which has applied since 1 June 2022. The exemption is available where neither the supplier nor the buyer holds more than a thirty per cent share of the relevant market, and where the agreement contains no hardcore restriction.
The hardcore restriction that matters most in franchising is resale price maintenance. A franchisor may not fix the price at which its franchisees sell, nor impose a minimum price, and pressure or incentives that achieve the same result are treated no differently. Maximum prices and recommended prices are permitted, provided the franchisee genuinely remains free to charge less. This is the point on which a uniform national promotion most often runs into difficulty, and it needs to be organised so that participation and pricing remain the franchisee decision.
Territorial and customer restrictions are permitted within limits. A franchisor may allocate an exclusive territory and prohibit active selling into the territory reserved to another franchisee, but a blanket ban on passive sales, on responding to unsolicited orders including those arriving through a website, is a hardcore restriction. Non-compete obligations during the term are exempted for a maximum of five years, subject to a specific exception where the franchisee operates from premises owned or leased by the franchisor. After the agreement ends, a non-compete obligation is exempted only if it is limited to one year, to the premises from which the franchisee operated and to competing goods or services, and is indispensable to protect know-how, which lines up neatly with art. 7:920 BW.
Enforcement lies with the Autoriteit Consument en Markt and, for agreements affecting trade between member states, with the European Commission. A clause that infringes the prohibition is void, and the void clause can take related provisions with it. That risk is not theoretical for a franchisor operating a large network, and competition compliance belongs in the same review as the Franchise Act check.
Trade marks, know-how and confidentiality
The formula is the asset, and it is protected by a combination of registered rights and secrecy rather than by the franchise agreement alone. A franchisor entering the Dutch market should have its position in order before the first agreement is signed, because a franchisee that is licensed a right the franchisor does not hold has a straightforward claim.
Registered rights
Trade marks are not registered nationally in the Netherlands. Protection runs either through a Benelux registration at the Benelux Office for Intellectual Property in The Hague, which covers Belgium, the Netherlands and Luxembourg under the Benelux Convention on Intellectual Property, or through a European Union trade mark at the EU Intellectual Property Office, which covers all member states in a single registration. Which route to take is a commercial decision about geography and cost rather than a legal one. A clearance search before filing is worth the outlay, because an opposition based on an earlier mark is far more expensive than the search. Our guide to intellectual property law in the Netherlands sets out the registration routes in more detail, and our intellectual property team handles filings and oppositions.
The trade name is a separate right. Under the Handelsnaamwet, protection arises automatically from actual use of the name in commerce, without registration, and it is limited to the area and the field in which the name is used. Registration in the trade register at the Chamber of Commerce is evidence of use, not the source of the right. A franchise agreement should therefore say precisely which marks, names, domain names and designs the franchisee may use, on what terms, and that the licence ends with the agreement. Model rights protect the appearance of a store fit-out or packaging and can be registered through the same offices.
Know-how and trade secrets
Know-how, the operational manual, the supplier terms, the recipes, the training material and the customer data, is not protected by a registered right. It is protected as a trade secret under the Wet bescherming bedrijfsgeheimen, which implements the EU Trade Secrets Directive. Protection depends on three cumulative requirements: the information is secret, it has commercial value because it is secret, and the holder has taken reasonable steps to keep it secret. That third requirement is the one that fails in practice. A manual emailed as an unprotected attachment to every applicant, with no confidentiality undertaking, is hard to defend as a trade secret afterwards.
The practical measures are unglamorous and effective: confidentiality undertakings signed before the PID is released, access restricted to those who need it, staff of the franchisee bound by their own confidentiality clauses, systems protected by credentials that are withdrawn when the relationship ends, and a contractual return-or-destroy obligation at termination. Where a breach occurs, the Act allows the court to order the infringer to stop, to hand over infringing goods and to pay damages, and interim relief is available quickly. See our articles on the protection of trade secrets, on how to protect trade secrets in practice and on the non-disclosure agreement.
Legal structure, registration and the money side
Neither party to a Dutch franchise agreement is required to take a particular legal form, and franchise agreements are not registered anywhere. What is required is registration of the business itself in the trade register held by the Kamer van Koophandel.
Most franchisors operate through a besloten vennootschap, the Dutch private limited company, because it separates the assets of the formula from the operating risk and because it is the structure international groups recognise. Incorporation runs through a civil-law notary and takes a matter of days; there is no minimum capital of substance and no nationality or residence requirement for shareholders or directors. Our article on the BV, the Dutch company with limited liability explains the formalities, and our corporate law guide for entrepreneurs covers governance.
Franchisees have more choice. An eenmanszaak, the sole proprietorship, is quick and cheap but leaves private assets exposed to business creditors, which is a poor fit for a franchise requiring a substantial fit-out investment. A vennootschap onder firma allows two or more people to run the outlet together, with joint and several liability for the partners. A BV shields private assets and is the usual choice once the investment or the payroll becomes significant, at the price of annual accounts and more administration. Whichever form is chosen, registration in the Dutch business register is mandatory, and the details recorded there, including who is authorised to represent the company, are what counterparties are entitled to rely on. Franchisors should check the register before signing and again before serving any notice; see our corporate law pages for the wider picture.
Fees, transparency and tax
The Act does not cap franchise fees or dictate how they are calculated, but it does require transparency. The fee structure and the way it may be adjusted must be disclosed before signing, and where the franchisor charges costs through to the network, for instance for marketing or IT, it must be able to show that those costs were genuinely incurred and how they were allocated. A marketing fund that cannot be accounted for is a recurring source of dispute, and the sensible answer is an annual statement to the network.
Franchise fees, royalties and marketing contributions are ordinarily subject to Dutch VAT, and cross-border royalty flows raise questions of withholding, treaty relief and transfer pricing that turn on rates and thresholds which change from year to year. Law and More does not advise on tax structuring; that work belongs with a Dutch tax adviser, and it should be done before the fee model is fixed rather than afterwards. What is fixed is the administrative obligation: business records must be kept for seven years, and the underlying data for franchise fees fall within that duty. Foreign franchisors should also read our note on legal pitfalls for foreign companies doing business in the Netherlands.
Ending the relationship
How a franchise agreement can be brought to an end depends first on whether it runs for a fixed term or for an indefinite period, and the difference is often decisive.
A fixed-term agreement runs to its end date. Neither party can terminate it early unless the contract gives them that right, and a party that walks away regardless is in breach and liable for the damage. What both parties do have is the general remedy for non-performance: where the other party fails to perform and the failure is sufficiently serious, the agreement can be rescinded under art. 6:265 BW, in most cases after a written notice giving a reasonable period to put things right. A minor or temporary shortcoming does not justify rescission of a relationship into which a franchisee has invested heavily, and the court weighs the seriousness of the breach against the consequences of ending the contract.
An agreement for an indefinite period can in principle be terminated on notice. Dutch law treats a franchise agreement as a long-term relational contract, and case law of the Hoge Raad requires the terminating party to observe a reasonable notice period, sometimes to have a sufficiently serious ground, and in some circumstances to offer compensation, even where the contract itself sets a shorter notice period. What is reasonable depends on the duration of the relationship, the investments the franchisee has made and whether it has been able to recoup them, and the extent to which it depends on the formula for its income. Our article on termination and notice periods works through the factors.
Whatever the route, the end of the agreement triggers the goodwill provision. If the franchisor takes over the business to continue it itself or through a successor franchisee, the compensation mechanism laid down in the contract under art. 7:920 BW applies, and the absence of a workable mechanism is itself a breach of the Act. Alongside it come the practical unwinding obligations: the licence to use the marks and trade name ends, signage and stationery must be removed, confidential material must be returned or destroyed, and the post-term non-compete restriction, if valid, runs for at most one year in the area where the franchisee operated. Where the franchisee wants to sell rather than exit, the transfer provisions in the agreement govern, and the franchisor consent conditions in them should be tested for reasonableness before they are relied on.
Where franchise disputes actually come from
Four patterns account for most of the files that reach us. The first is a turnover forecast that was never achievable at the location, followed by a franchisee who cannot meet the fees. The second is a formula change imposed without the consent art. 7:921 BW requires, usually a mandatory refit or a new IT system. The third is a legacy agreement that was never updated after 1 January 2023 and contains a two-year national non-compete clause and no goodwill provision. The fourth is a termination that is contractually correct but commercially brutal, where the notice period bears no relation to the investment the franchisee was asked to make.
All four are cheaper to prevent than to litigate. For a franchisor, that means a PID that is complete and honest, a contract reviewed against art. 7:911 to 7:922 BW and against the block exemption, a documented consultation process, and a fee model that can be substantiated line by line. For a prospective franchisee, it means using the four-week standstill for what it exists for: have the forecast checked by your own accountant, ask for the assumptions behind it, ask how many outlets have closed in the last three years and why, read the manual as part of the contract, and have the non-compete, goodwill and termination clauses reviewed before you sign rather than when you want to leave. Where a dispute is already running, our business dispute resolution team can assess the position, and our article on common mistakes in international commercial contracts covers the cross-border angle.
Frequently asked questions
The Dutch Franchise Act has applied since 1 January 2021 and governs pre-contractual disclosure, consent rights and goodwill for every franchise operation with a branch in the Netherlands. The questions below are the ones franchisors and franchisees ask most often.
What are the primary laws governing franchising agreements in the Netherlands?
The Dutch Franchise Act is the main law governing franchise agreements in the Netherlands. This Act became effective on 1 January 2021 and contains mandatory provisions that cannot be avoided through contractual terms.
The Act applies whenever franchise locations operate in the Netherlands, even if the franchise agreement is governed by foreign law. If your franchise branches are located outside the Netherlands, the Franchise Act may not apply even when Dutch law governs the contract.
Competition law from both the European Union and the Netherlands also regulates franchise relationships, particularly regarding territorial restrictions and pricing. Dutch contract law and intellectual property law additionally affect franchise operations.
Employment law can become relevant if the franchisor exercises extensive supervision over the franchisee. This may create an employer-employee relationship under mandatory Dutch regulations.
What due diligence is required before entering a franchising agreement under Dutch law?
You must provide prospective franchisees with a pre-information document, commonly called a PID. This document must be delivered before signing any franchise agreement.
The law requires a mandatory standstill period of four weeks after providing the PID. During this period, the prospective franchisee can review the information without pressure.
You cannot require prospective franchisees to make payments or investments during this four-week standstill period. Whether smaller costs like external location surveys are permitted before the standstill period remains unclear, as the Act does not explicitly address pre-PID expenses.
For multiple franchising situations where an existing franchisee opens additional locations, the four-week standstill period does not apply. You should still provide a PID for each new location, especially when relevant information about the new establishment is available.
How does the Dutch franchising code regulate the relationship between franchisors and franchisees?
The Franchise Act requires you to obtain franchisee consent for certain major decisions affecting the franchise network. Decisions requiring consent need approval from at least a simple majority of all franchisees, which means more than 50%.
If a decision only affects a specific group, such as franchisees in a particular region, you only need consent from that affected group. You have mandatory information duties towards your franchisees throughout the franchise relationship.
These duties require transparency about matters affecting the franchise network. For example, if you acquire another franchise formula that operates in overlapping areas, you must inform existing franchisees in a timely manner.
The Act restricts your ability to operate competing formulas within exclusive territories of existing franchisees. If the new formula qualifies as a “Derivative Formula” that shows strong similarities to your existing franchise in the perception of consumers, you need prior consent from affected franchisees.
This typically applies when the formulas use similar visual characteristics or trademarks.
What are the disclosure requirements for franchisors before entering into an agreement in the Netherlands?
You must provide a comprehensive pre-information document to prospective franchisees before they sign any franchise agreement. The PID must contain detailed information about your franchise organisation, the costs of operating a franchise, and available revenue data.
The document should include information about the franchise system, your company’s financial position, and any relevant exploitation data for the proposed location. If you have information about previous financial performance at the specific site or data about the local area, this information may need to be included in the PID.
The legal text does not clearly specify whether you must provide a new PID when renewing franchise agreements every five years. However, if substantial changes have been made to the franchise agreement or cost structure, providing an updated PID may be necessary.
In what instances can a franchising agreement be terminated, and what are the legal implications in the Netherlands?
The Franchise Act requires that your franchise agreement includes a provision determining how goodwill will be calculated at the end of the agreement. You cannot simply exclude goodwill compensation through contractual terms.
The provision must explain the methodology for calculating goodwill. The amount of goodwill depends on factors such as your brand strength and the type of franchise formula.
With a strong brand and “hard formula” where you control most aspects, the franchisee’s contribution to goodwill may be limited. In “soft franchising” arrangements where the franchisee has more independence, goodwill may be substantial.
If you believe no goodwill compensation is appropriate, your franchise agreement must contain a clear explanation for why the franchisee will not receive any goodwill payment. Whether courts will uphold a zero-goodwill provision remains uncertain, as case law on this issue has not yet developed.
What dispute resolution mechanisms are commonly included in Dutch franchising contracts?
Your franchise agreement can include various dispute resolution mechanisms such as arbitration, mediation, or standard court proceedings.
The choice of dispute resolution does not affect the mandatory application of the Franchise Act when franchise locations operate in the Netherlands.
Even if your franchise agreement is governed by foreign law and includes foreign dispute resolution forums, Dutch courts or arbitrators will still apply the mandatory provisions of the Franchise Act.
The Act explicitly states that its protections cannot be waived or excluded when franchise branches are located in the Netherlands.
Arbitrators or mediators handling disputes involving Netherlands-based franchises must apply the Franchise Act’s requirements regardless of what law governs other aspects of the agreement.
How Law and More can help
Law and More advises franchisors entering the Dutch market and franchisees assessing an offer. We draft and review franchise agreements and pre-contractual information documents against art. 7:911 to 7:922 BW and the vertical block exemption, advise on consent rights when a formula changes, register and enforce trade marks and trade secrets, and act in disputes about forecasts, fees, non-compete clauses, goodwill and termination. If you are preparing a franchise agreement or have received one, contact our office before the four-week standstill period runs out.
