Buying a franchise in Belgium: beware of reservation fees

An attractive location, a competing candidate and a request to pay a reservation fee quickly: a franchise decision can suddenly gather pace. Yet a reservation is not necessarily a harmless interim step. Anyone joining a franchise network must first be free to assess whether the partnership is right for them. So look beyond the amount involved: focus on what you are committing to and when you are being asked to make that commitment.

1. Look at the substance, not the label

A franchisor may present you with a reservation form, a letter of intent or a preliminary agreement. The title does not tell you whether the document is binding. A text that begins with ‘a non-binding expression of interest’ may still contain an obligation to pay, a purchasing commitment or a withdrawal fee further down.

First ask exactly what is being reserved. Is it a specific outlet, the right to negotiate over a location or simply a place in the selection process? A payment without a clear commitment in return offers little certainty.

Then check the following points:

• Parties: who receives the money, and who undertakes to honour the reservation?
• Subject matter: which location or opportunity is actually being held for you?
• Duration: when does the reservation start and end?
• Obligations: will you then have to sign, invest or purchase particular services?
• Withdrawal: do you lose only the amount paid, or will an additional fee be charged?

Agreement by email can also have legal consequences. Do not treat ‘just confirm that you agree’ as a mere administrative formality.

2. Observe Belgium’s ban on premature commitments

Belgium has specific rules governing the pre-contractual stage of commercial partnership agreements. These appear in Title 2 of Book X of the Belgian Code of Economic Law (WER), Articles X.26 to X.33. The statutory definition is set out in Article I.11, 2°. Franchise agreements that meet that definition fall within these rules.

Under Article X.27 WER, you must receive the draft agreement and the pre-contractual information document, commonly known in Dutch as the PID, at least one month before entering into the agreement. These documents must be supplied in writing or on a durable medium accessible to you.

Crucially for reservation fees, as a general rule, no commitment may be entered into within this relationship, and no fee, sum or security deposit may be requested or paid, before that period expires. The law provides exceptions for confidentiality arrangements and certain obligations under existing agreements. These are not blanket exceptions for a new candidate wishing to reserve an outlet.

A ‘refundable advance’ is therefore not automatically permitted. An amount that will later be deducted from the initial franchise fee is still a payment. Nor does a small amount make the issue insignificant.

The period is also a minimum time for consideration, not a deadline for signing. You are under no obligation to proceed once it ends. If the statutory consideration period is not respected, the candidate may, subject to the legal conditions, seek to have the agreement declared null and void within two years of its conclusion. Obtain legal advice on your particular circumstances before taking action on that basis.

3. Make any permitted reservation specific

Even after the statutory period has expired, a reservation is not automatically a sensible move. Have any separate agreement reviewed before signing or paying. The ordinary rules of contract law remain relevant, as do Belgium’s rules on unfair terms in business-to-business contracts.

Above all, negotiate what happens if the franchise agreement ultimately does not go ahead. Specify when the full amount will be refunded, the deadline for repayment and whether any costs may be deducted. A vague reference to ‘costs already incurred’ makes your potential loss difficult to predict.

For any deductions, ask for the categories of costs to be defined in advance, a cap on the amount and evidence of actual expenditure. Distinguish between your own decision to withdraw and the franchisor pulling out. You do not want to pay for a reserved opportunity that the other party ultimately withdraws.

Also clarify whether the franchisor may negotiate with other candidates during the reservation period. A reservation fee without a clear corresponding obligation deserves particularly close scrutiny. Do not assume that an unfavourable clause is automatically invalid: that requires an assessment of its wording and the circumstances.

4. Separate reservations with the brand from arrangements with third parties

A payment to a franchisor is not the same as a deposit paid to an independent landlord or an instruction to your own adviser. The pre-contractual franchise rules do not automatically cancel these separate arrangements if you decide not to buy the franchise.

Draw up a single overview of all early commitments, recording the recipient, purpose, amount, signing date and consequences of withdrawal. Also check whether an apparently independent recipient is connected to the franchisor. If in doubt, seek advice on how the arrangement relates to the franchise rules.

Practical conclusion: do not pay to buy yourself time until it is clear that payment is legally permitted. Then have the agreement specify exactly what you are reserving, what freedom you retain and when you will get your money back.