Buying a franchise in Belgium: align your commercial lease

A strong franchise concept can come unstuck because of an unsuitable lease. As a prospective franchisee, you are joining a franchise network, but your right to use the premises usually comes from a separate agreement. These two agreements need to work together. Otherwise, you could end up paying rent for an outlet that cannot open, or lose your premises while your franchise obligations continue.

1. Understand the leasing arrangement

First, ask who owns the premises and who your landlord will be. Will you rent directly from an independent owner, from the franchisor or under a sublease? Each arrangement requires different checks. A franchisor offering you a site does not necessarily own it and cannot automatically grant you rights beyond those it holds itself.

If you are renting directly, check that the landlord permits your intended use. If you are subletting, also ask to see the relevant provisions of the head lease. Have an adviser check whether subletting is permitted, what consent is required and what happens to your right to occupy the premises if the head lease ends.

Before making your decision, ask for at least:

• the draft lease or sublease;
• plans and a description of the premises being let;
• arrangements for communal areas, deliveries and parking spaces;
• relevant consents from the owner or head landlord;
• a breakdown of rent, charges and any separate fees for use of the premises or facilities.

A verbal promise that you can use the premises “for as long as necessary” does not provide sufficient certainty.

2. Compare both the contract terms and the applicable legal frameworks

Review the lease and franchise agreement side by side. For each, note the start date, duration, termination options and conditions for continuing the agreement. In particular, check whether the franchise term starts on signing or only when the outlet opens. Otherwise, fitting out the premises could eat into your contract term.

In Belgium, conventional retail and certain other commercial leases are generally governed by the Commercial Lease Act of 30 April 1951, which provides for a minimum term of nine years. However, not every property used for business purposes falls within this framework. Relevant factors include the intended use and direct contact with the public. There are also regional rules for short-term commercial leases. Have an adviser establish which framework applies to your location and agreement.

A franchise agreement with a shorter term does not automatically bring your commercial lease to an end. Conversely, extending your franchise agreement does not guarantee that your lease will be renewed. Commercial lease renewals are subject to strict conditions, deadlines and formalities; record these separately in your diary.

Belgium’s pre-contractual franchise rules also remain important. Title 2 of Book X of the Code of Economic Law, Articles X.26 to X.33, governs pre-contractual information for commercial cooperation agreements. You must receive the draft agreement and pre-contractual disclosure document at least one month before entering into the franchise agreement. This does not replace a review of the lease. Seek advice on whether any proposed lease or reservation arrangement is compatible with this protected negotiation period.

3. Confirm that the premises are usable before making an unconditional commitment

Approval of a site by the franchisor is not the same as consent from the landlord or the authorities. Check separately whether your business activity is permitted on the premises and which permits, notifications or certificates are required. These requirements vary according to the activity, region and municipality.

Consider a hospitality business that needs extraction equipment, a shop with refrigeration units or a service-based concept requiring a different layout. Also check fire safety, accessibility, electrical capacity, external signage and delivery access. Ask who will carry out the checks and who will pay for any necessary alterations.

Discuss conditions precedent with your adviser: conditions that must be met before you are unconditionally bound, covering key uncertainties such as obtaining the necessary permits and finance. Specify exactly what outcome is required, by what date and with what supporting evidence. Also set out what happens to any money paid if a condition is not met.

Coordinate these conditions with both the landlord and the franchisor. A condition in the franchise agreement does not automatically protect you against payment obligations under a separate lease.

4. Allocate fit-out costs and handover risks

A fit-out tailored to a franchise concept can be expensive and may have little value outside that network. Before signing, ask for a written allocation of the works: what will the landlord provide, what does the franchisor require and what must you commission yourself?

Set out who is responsible for building defects, utility connections and delays. Also establish when rent and other charges become payable. A rent-free fit-out period is something to negotiate, not an automatic entitlement.

Finally, check your obligations when returning the premises. Will you have to remove flooring, façade cladding, pipework or equipment? Will improvements become the landlord’s property, and has any compensation been agreed? Factor these obligations into your investment decision rather than waiting until it is time to hand back the keys.

Practical conclusion: have the lease and franchise agreement reviewed together. Prepare a single overview of their terms, required consents, opening conditions and works. Only make an unconditional commitment once it is clear that you can actually use the premises for the franchise concept you are buying.