Buying a franchise in Belgium: check the right of first refusal

You have found an existing franchise business, reviewed the figures and discussed a price. Yet another party may still have priority: the franchisor, under a contractual right of first refusal. Within a franchise network, this arrangement can help safeguard an outlet’s continuity, but for you as the buyer it creates uncertainty. Before making a binding offer, check how the right works and when it will no longer stand in your way.

1. Distinguish first refusal from approval

A right of first refusal gives its holder the opportunity to acquire the business ahead of other buyers, subject to the agreed conditions. Often, the franchisor can do so by matching a prospective buyer’s price and terms. However, the precise wording of the contract determines what must be offered and how the right is exercised.

This is different from approval to join the network. When approving you as a franchisee, the franchisor assesses whether you may operate the outlet. First refusal concerns whether you can buy the intended business at all. A positive assessment of your application therefore does not automatically mean that the franchisor has waived its right of first refusal.

Ask the seller for the full clause, including any schedules and subsequent amendments. Then establish:

• Who may exercise the right: only the franchisor, or a nominated third party as well?
• Which transactions does it cover: a sale of the business and its assets, a share transfer, or other changes of control too?
• Does the right apply to the entire transaction or only certain parts?
• Must the holder accept all the terms, or merely match the price?

Do not assume that a right of first refusal arises automatically by law. This is a contractual arrangement whose terms may differ between franchise systems.

2. Map out the procedure before making an offer

A first-refusal procedure is only useful if you know what triggers the response period. Sometimes the seller must pass on a complete offer, including the price, payment arrangements and other terms. An informal notification that a buyer is interested may not be enough.

Ask your adviser to draw up a brief procedural checklist: who must notify whom, in what form, with which supporting documents and by what deadline? Also check how receipt is established. Do not assume that a general statutory deadline of 30 days applies to every franchise acquisition; the specific contractual procedure is what matters.

Next, ask what silence means. Does the right lapse at the end of the response period, or does the agreement require an explicit reply? A verbal assurance from the seller does not provide sufficient certainty.

Watch out for changes after notification, too. If you later agree a lower price, a longer payment period or an additional guarantee, the revised offer may need to be put to the right holder again. Have your adviser check that the final purchase terms match those on which the right of first refusal was waived.

3. Limit your costs while priority remains uncertain

You need to investigate thoroughly enough to make an informed offer, without incurring all the acquisition costs before it is clear who can buy. Proceed in stages. Start with a limited financial and operational review. Where possible, schedule expensive follow-up work only once the first-refusal procedure is complete.

Discuss with your lawyer how to make your offer or purchase agreement conditional on the right of first refusal not being exercised, validly lapsing or being expressly waived. Also specify when you must receive confirmation and what happens to any deposit if the right holder acquires the business.

Consider less obvious elements of the price, too. A purchase price involving seller financing is not necessarily equivalent to full payment on completion. Stock valuation, deferred payments and arrangements for handover support may also form part of the offer that must be matched.

Agree in advance who will bear which advisory costs if the sale to you falls through. Reimbursement of your costs is not automatic. Rely on it only if it has been clearly and validly agreed.

4. Keep Belgium’s franchise rules separately in view

The first-refusal procedure does not replace Belgium’s pre-contractual protections. Title 2 of Book X of the Belgian Code of Economic Law, Articles X.26 to X.33, governs pre-contractual information for commercial cooperation agreements, including franchise agreements that fall within the statutory definition.

When entering into a new franchise agreement, you must generally receive the draft agreement and the pre-contractual information document at least one month in advance. During that statutory period, as a general rule, no commitments may be entered into and no fees, sums of money or security deposits may be requested or paid, subject to statutory exceptions.

For an acquisition, have your adviser assess separately how these rules apply to the proposed transaction structure. The purchase agreement with the seller and the cooperation arrangement with the franchisor are distinct legal relationships. Completing the first-refusal procedure is therefore not a green light to sign all the documents immediately. General contract law and the rules on unfair terms between businesses also remain relevant.

Practical takeaway: only incur non-recoverable costs once your adviser has confirmed that the first-refusal procedure has been properly completed for the exact transaction you intend to enter into.