Franchising in the Netherlands

Franchising in the Netherlands

A franchise agreement is a contract by which a company (“the franchisor”) licenses its trade name and/or business system and practices for a fee to an independent company (the franchisee).

Franchise agreements under Dutch law

Franchise agreements are not specifically addressed in Dutch law. Therefore the general rules of contract- and competition law applies. There are various forms of franchising, for example hard and soft franchise formulas. Considering the complexity of a franchising agreement, a franchise agreement is general in written form. The following general principles should be taken into account when drafting a franchise agreement:

  • franchise agreements are not regulated in Dutch law. General contract law applies;
  • the principles of reasonableness and fairness (in Dutch: “redelijkheid en billijkheid”) are the guiding principles;
  • the Dutch party needs to register its business with the Trade Register of the Dutch Chamber of Commerce.

Rights and obligations of the franchisor/ franchisee

Due to the special nature of franchising, the franchisor has a special duty of care towards the franchisee. This means that the franchisor is obliged to provide the franchisee with advice and assistance to a certain extend. Dutch law does not contain a duty to disclose precontractual information. However, the principle of reasonableness and fairness applies to this matter. Therefore parties are obliged to take reasonable action to prevent that the other party agrees upon an agreement based upon incorrect information. In addition, a franchisor is not obliged to provide the franchisee an exploitation forecast. Please note, once information has been provided, other parties may rely that this information is correct. Providing the franchisee an exploitation forecast which is too optimistic and/or is not based on a thorough market research, may therefore lead to liability of the franchisor.

Since Dutch law does not contain specific regulations regarding the franchise fees and/or royalties, advertising, reporting obligations and non-compete clauses parties are free to determine to what extend obligations arise for the franchisee.

Termination of frnachise agreement

Freedom of contract allows the parties to determine on which grounds termination is permitted. If parties have not agreed on rules of termination, an agreement for a fixed term cannot be terminated unless there are unforeseen circumstances. On the other hand, if the agreement is concluded for an indefinite period, this agreement can generally be terminated, provided that a reasonable notice period is taken into account. What should be considered as an reasonable notice period depends on the circumstances of the case.

Another option is annulment. Article 6:265 of the Dutch Civil Code stipulates that any default by the other party gives the right to annul the agreement, unless the default does not justify the annulment. Furthermore, in respect of article 6:228 Dutch Civil Code there might be a possibility to declare the franchise agreement null and void based on an error (in Dutch: “dwaling”).

The final point to mention is that despite the fact an agreement is lawfully terminated, yet some damages may not be considered to be part of the business risk of the franchisee and therefore may be eligible for compensation.

Dutch attorney in Amsterdam, specialized in franchise agreements under Dutch law

If you have any questions about a franchise agreement under Dutch law, please do not hesitate to contact Mr Gijs Kuijper from Blenheim Attorneys in Amsterdam. We can assist in all kinds of issues regarding franchise agreements when Dutch law applies. Regarding the complexity of Dutch franchise law, we advise you to contact a lawyer before entering into a franchise agreement. Our lawyers (inter alia Gijs) can assist you in assessing the agreement, drafting the franchise agreement or assisting you in legal proceedings.

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