Buying a franchise in Belgium: scrutinise the minimum turnover requirement

A franchise opportunity may look attractive until you discover that the contract requires you to achieve a minimum turnover. A disappointing year could then affect not only your income, but also your right to keep running the business. Clear performance commitments matter in franchising. Before you buy, establish whether a turnover target is an aspiration, an obligation to make certain efforts or an enforceable obligation to achieve a specific result.

1. Distinguish a sales target from a contractual obligation

A turnover figure in a presentation does not necessarily carry the same weight as a minimum set out in the franchise agreement. Look for terms such as ‘minimum performance’, ‘annual target’, ‘sales quota’ and ‘mandatory turnover’. Then read what happens if you fail to reach the stated level.

There are three situations to distinguish:

• An indicative target: a benchmark for running your business, with no agreed penalty for falling short.
• An obligation to make certain efforts: you must undertake specified sales activities, such as finding local customers or taking part in promotions.
• An obligation to achieve a result: you must deliver a particular outcome; effort alone may not be enough.

The heading above a clause is not decisive. A ‘shared ambition’ can still have serious implications if another part of the agreement says that falling short constitutes a breach of contract. Ask the franchisor to confirm the target’s legal status in writing, and have your adviser check that the agreement reflects this.

2. Define exactly what is being measured

A minimum turnover requirement can only be assessed properly if the calculation is clear. Is turnover measured inclusive or exclusive of VAT? How are discounts, returns and cancelled orders treated? Is a sale recorded when the order is placed, the goods are delivered, the invoice is issued or payment is received?

Pay particular attention to sales involving several outlets or channels. For example, a customer may order online but collect from your premises, or your outlet may serve a national account. If you do the work but the turnover is recorded elsewhere, the performance figures may give a misleading picture.

Also ask which records take precedence and how you can have errors corrected. Agree a checking procedure before any shortfall is determined.

Practical test: ask the franchisor to work through a few hypothetical transactions. Include a return, an online order and a sale at the end of the financial year. This will show whether both parties are using the same definition.

3. Assess how much control you have over the result

A turnover obligation deserves particular scrutiny when key factors affecting sales are outside your control. Stock shortages, prolonged system outages or the loss of centrally provided services can restrict sales even when you run your business well.

Ask how the agreement deals with:

• the start-up period and an opening partway through the measurement year;
• temporary closures or restricted access to the premises;
• prolonged supply problems;
• changes to how online sales are allocated;
• works that the franchisor requires you to carry out.

These are points for negotiation, not automatic statutory exceptions. Specify when the requirement will be adjusted, what information is needed and who makes the decision.

Also ask your accountant to assess the cost of meeting the target. Longer opening hours, extra staff or discounts may increase turnover while reducing profit. A target that rewards sales alone says little about your outlet’s financial health. Check whether the required turnover is compatible with running a profitable business.

4. Have the legal consequences reviewed

Belgium has no standalone law governing franchise agreements in their entirety. However, specific pre-contractual disclosure requirements for commercial cooperation agreements apply under Title 2 of Book X of the Belgian Code of Economic Law (known by its Dutch abbreviation, WER). In principle, a prospective franchisee must receive the draft agreement and the pre-contractual disclosure document at least one month before entering into the agreement.

Use that period to have the minimum turnover requirement and its consequences reviewed together. General contract law and Belgian rules on unfair terms between businesses also apply. A clause that creates a manifest legal imbalance, either on its own or together with other provisions, may be unfair. A minimum turnover requirement is not, however, automatically prohibited or invalid.

In particular, have your adviser check whether a single missed target at a measurement point could immediately trigger serious consequences. Ask for clear notice of any shortfall, access to the calculation, an opportunity to discuss the issue and a reasonable chance to remedy it. Also check whether several consequences can apply at once, such as an additional payment alongside termination.

5. Prepare a decision sheet before signing

Summarise the arrangement on one page: the target, measurement period, definition of turnover, exceptions, checking procedure and consequences. Also note any improvements you still want to negotiate. Verbal reassurances such as ‘we never enforce this strictly’ are no substitute for clear contractual wording.

Practical conclusion: only accept a minimum turnover requirement once you understand what is being measured, how much control you have over the result and what a shortfall would mean. Resolve any uncertainties before signing, not after missing the first target.