Buying a Franchise in Belgium: Assess the Initial Fee

An initial franchise fee seems straightforward: you make a one-off payment to join a franchise network. But what exactly are you paying for, and what happens if your outlet never opens? If you are considering buying a franchise in Belgium, you should assess this fee as more than just a cost. What you receive in return, when payment is due and what happens if the launch falls through all deserve separate attention.

1. Clarify what the initial franchise fee buys you

The initial franchise fee may, among other things, cover the development of the business concept and the recruitment of new franchisees. It is therefore not necessarily an advance payment for services provided exclusively for your outlet. The package may also include specific start-up services, such as initial training or support with the opening.

Ask for a written breakdown. Have the franchisor distinguish between:

• access to the franchise concept and accumulated know-how;
• specific services for your own launch;
• materials or tools you will receive;
• expenses charged separately despite the initial fee.

That last category helps prevent surprises. Are travel costs for training included? Will you have to pay for accommodation yourself? Does the package cover setting up the point-of-sale system, opening materials and on-site support?

A franchisor does not have to base its price solely on documented working hours. You are also buying access to an established concept. However, it must be clear what the price covers. Compare brands not just on the fee itself, but on the total start-up costs and the specific contents of the package.

2. Set clear terms for start-up services

A description such as ‘comprehensive start-up support included’ offers little certainty. Ask what work will be carried out, by whom and when. For training, for example, specify the content, the number of participants and any charges for retakes.

Create a simple table with four columns: deliverable, responsible party, scheduled date and separate charges. Use the same descriptions in the contract schedule and the quotation. This helps prevent an appealing sales presentation from suggesting a broader package than the contract actually promises.

Also check where the initial fee ends and ongoing royalties begin. One-off training may form part of the start-up package, while continuing commercial or technical support is covered by royalties. Ask for an explanation if the same service appears in both descriptions. This does not automatically mean you are paying twice, but it does need clarification.

Then ask your accountant how the fee should be treated in your financial plan and accounts. Its commercial label does not, in itself, determine its accounting or tax treatment. Also ask whether the quoted price includes or excludes VAT and when the invoice will be issued.

3. Follow Belgian rules before making a payment

Commercial cooperation agreements that fall within the statutory definition, including many franchise agreements, are subject to Title 2 of Book X of the Belgian Code of Economic Law. Articles X.26 to X.33 govern pre-contractual information.

The franchisor must provide you with the draft contract and the pre-contractual information document, commonly known in Belgium as the PID, at least one month before the agreement is concluded. During this statutory period, as a general rule, no commitment may be entered into and no fee, other payment or security deposit may be requested or paid.

An initial franchise fee does not therefore become permissible simply because the franchisor calls it a ‘reservation fee’, ‘administration fee’ or ‘advance payment’. Have any payment request made during this stage reviewed by a legal adviser before you pay or commit yourself.

The law provides exceptions for, among other things, obligations under a confidentiality agreement and certain obligations under existing agreements. These do not amount to general permission to charge a new applicant an initial fee in advance.

Once the statutory period has ended, not every payment term is necessarily sensible. Where possible, negotiate instalments linked to clearly defined start-up deliverables. This is a contractual arrangement, not a general statutory right.

4. Agree what happens if the opening does not go ahead

Before signing, discuss several scenarios: you decide not to proceed, the franchisor fails to deliver agreed services, or an external factor makes opening impossible. The financial consequences need not be the same in each case.

For each scenario, specify what proportion of the fee will be retained, what will be refunded and within what timeframe. Distinguish between payment for access to the concept, services already delivered and work not yet carried out. Avoid vague terms stating that all costs incurred will be deducted without further explanation.

Do not assume that, after signing, you have a general right to withdraw as you might under certain consumer contracts. You are acting as an independent business owner. Equally, a ‘strictly non-refundable’ clause is not necessarily beyond challenge: general contract law and Belgian rules on unfair terms between businesses may be relevant. Have the specific wording reviewed.

Practical conclusion: do not simply pay for the right to get started. First, secure a clear description of the package, a legally compliant payment schedule and written terms covering a launch that does not go to plan.