Buying a franchise in Belgium: agree what happens to stock when you leave

When buying a franchise, your main focus is usually on opening the business and making your first sales. Yet your final stockholding deserves attention too: what happens to it when the relationship ends? Being part of a franchise network does not automatically mean the franchisor will take back unsold products. Agreeing clear terms before signing helps prevent you from being left with goods you have paid for but can barely sell when you leave.

1. Distinguish between ownership and the right to sell

A warehouse full of products does not necessarily represent money you can recover when you leave. Some goods belong to you; others may have been supplied on consignment or remain the supplier’s property under a retention-of-title clause until they are paid for. Nor does ownership mean you can continue selling under the brand name without restriction after the franchise ends.

For each major stock category, ask:

• Who owns the goods, and when does ownership transfer?
• Which invoices remain unpaid?
• Can the products be used or sold outside the franchise network?
• Are there shelf-life limits, seasonal restrictions or special storage requirements?
• Who decides whether returns are accepted: the franchisor or a separate supplier?

Pay particular attention to own-brand products and packaging bearing distinctive franchise branding. Do not assume you can simply sell these through another shop or online store after leaving. Have any restrictions, and your options under trade mark law, assessed separately.

Next, draw up an overview of the stock you are expected to hold in the normal course of business. This will provide the basis for assessing your financial exposure when you leave.

2. Look for a binding buyback obligation

A clause stating that the franchisor ‘may buy back’ stock offers no certainty. Likewise, a promise to ‘find a solution’ when the relationship ends says little about how many products will be taken back or at what price.

Ask for specific terms setting out, at a minimum, which party must buy the stock, which goods qualify and when payment is due. Check that the named buyer is actually a party to the agreement. A franchisor cannot simply impose a buyback obligation on an independent supplier.

Discuss the different circumstances in which you might leave. Do the same terms apply when the contract expires, when both parties agree to end it and when it is terminated early? What happens if a new franchisee takes over the premises but wants to buy only part of the stock?

Scrutinise exclusions that undermine the buyback promise. For example, the terms might cover only the latest collection, even though you were required to keep offering older items. Also ask what happens to products the franchisor removes from the range shortly before you leave.

3. Agree the valuation and settlement terms

Even a clear buyback obligation can disappoint if no valuation method is specified. ‘Market value’ and ‘fair value’ leave considerable room for disagreement. It is better to specify the starting price and any adjustments that may be made.

Discuss, among other things:

• the original net purchase price, taking discounts into account;
• any reductions for age, damage or limited remaining shelf life;
• how opened packaging, demonstration products and returned goods will be treated;
• transport, stocktaking and handling costs;
• the payment deadline and any set-off against other amounts owed.

Work through several exit scenarios with your accountant. Calculate not just the book value but also the amount you would actually receive after all agreed deductions. The value of stock in your accounts does not guarantee an equivalent sale price.

Also agree how the final stocktake will be conducted. A joint stocktake, clear quality criteria and a procedure for disputed items help prevent either party from deciding unilaterally afterwards which goods are acceptable.

4. Check the terms against Belgian law

Belgium has no standalone law governing franchise agreements in their entirety. However, Title 2 of Book X of the Belgian Code of Economic Law governs pre-contractual information for commercial cooperation agreements, including franchise agreements that meet the statutory criteria.

Under Article X.27, you must receive the draft contract and a separate pre-contractual disclosure document at least one month before entering into the contract. Use these documents to assess the stock arrangements. This disclosure requirement does not, in itself, create a general obligation for the franchisor to buy back your remaining stock.

General contract law and the rules on unfair terms between businesses are also relevant. A clause creating a manifest imbalance in the parties’ legal rights and obligations may be assessed under those rules. This does not mean every unfavourable stock clause is automatically invalid: have a legal adviser assess it in the context of the agreement as a whole.

Finally, agree whether a sell-off period is permitted, what branding you may use during it and which obligations will continue to apply. Coordinate that period with the stocktake, collection and payment arrangements.

Practical conclusion: sign only once you can explain who will buy your remaining stock, which products will be accepted, how the price will be calculated and when you will be paid. If that certainty is missing, explicitly factor the potential cost of leftover stock into your decision to buy.