Buying a Franchise in Belgium: Check the Advertising Fund

A strong brand needs joint advertising, but paying into it does not automatically tell you where the money goes. An advertising fund can enable shared campaigns across a franchise network. As a prospective franchisee, what matters most is the terms governing that fund. Before buying, investigate not only how much you must contribute, but also who manages the budget, which expenses are permitted and how you will be kept informed.

1. Identify all your advertising obligations

An advertising fund is usually a contractual arrangement under which franchisees contribute to shared marketing. However, the name tells you little about its legal or financial structure. It may be a separately managed budget, or simply income and expenditure within the franchisor’s business. Do not assume that the money is held in a separate account.

Ask for a complete breakdown of your obligations. Alongside a central contribution, there may be mandatory local advertising, launch campaigns, promotional materials or digital campaign costs. Distinguish between money you pay to the franchisor and advertising you must purchase yourself.

For each obligation, establish:

• who receives the payment and who runs the campaign;
• when the contribution is due;
• which services or expenses it pays for;
• whether local advertising is required on top of the central contribution;
• whether the franchisor’s own outlets also contribute.

Also ask whether a mandatory local budget can be spent freely within brand guidelines, or only through designated channels. This helps prevent the same advertising work from appearing under several cost headings without a clear distinction between them.

2. Check Belgium’s disclosure requirements

Belgium has no standalone law governing the entire franchise agreement. It does, however, have specific pre-contractual rules for commercial cooperation agreements that meet the statutory definition. These are set out in Book X, Title 2 of the Belgian Code of Economic Law, read together with Article I.11, 2°.

Under Article X.27 of the Code, prospective franchisees must receive the draft agreement and a separate pre-contractual disclosure document, commonly known by its Dutch abbreviation PID, at least one month before entering into the agreement. Article X.28 specifies the key contractual provisions and socio-economic information that this document must contain. Any agreed direct remuneration must be clearly described; any agreed indirect remuneration must be disclosed, along with the method used to calculate it.

Ask your legal adviser to assess how the advertising contribution is classified in law and how it should be presented in the PID. Then compare that description with the draft agreement: is it a fee for services, a contribution earmarked for a particular purpose, or a combination of the two?

A disclosure requirement does not guarantee a ring-fenced fund, a say in decisions or scrutiny of the accounts. Have such rights expressly included in the agreement. General contract law and Belgium’s rules on unfair terms in business-to-business contracts are also relevant. Whether a particular clause is valid requires an assessment of the agreement as a whole.

3. Investigate what the money actually pays for

Request the available budget and the latest expenditure report. A new franchise concept may have no spending history. In that case, ask for a detailed plan setting out cost categories, responsibilities and reporting dates. Do not treat a proposed plan as evidence of results already achieved.

Pay particular attention to the distinction between attracting customers and pursuing other business objectives. Does the fund pay for advertising that brings consumers into outlets, general brand awareness, or recruiting new franchisees? These objectives may have different implications for your business.

Also discuss staff costs, agency fees, software and internal administration costs. Ask which of these are charged to the fund and how they are allocated. Where work is awarded to related companies, ask who assesses the pricing and performance.

National visibility does not benefit every outlet equally. Ask how the plan takes account of your catchment area, your customers’ language and the available sales channels. You should not assume that every outlet will see the same local return. You can, however, assess in advance whether the proposed approach is reasonably suited to your Belgian outlet.

4. Agree reporting arrangements and decision-making rights

Turn the answers into clear contractual terms. As a minimum, request an annual budget, a breakdown of actual expenditure by category and explanations for significant variances. Agree when you will receive this information and whom you can contact with questions.

Also specify what happens to unspent funds. Are they carried forward to the following year? Can a shortfall be charged to franchisees later? And how will expenditure under the current budget be accounted for when the relationship ends? A refund on departure is not automatic: check what the agreement says.

Distinguish between the right to advise and the right to decide. A marketing committee that allows franchisees to contribute ideas does not automatically have the power to block expenditure. Ask who makes the final decisions and what procedure applies to disputed spending. Where appropriate, negotiate rights to inspect records or obtain an independent review, without seeking access to other outlets’ confidential information.

Practical conclusion: only agree to an advertising contribution once its purpose, management and reporting arrangements are clear. You are not buying a guaranteed flow of customers, but you should be able to assess how your money will be used.