Buying a Franchise in Belgium: Check Your Renewal Rights

When buying a franchise, you will often expect the relationship to last beyond the initial contract term. Mutual trust may develop within the franchise network, but it is no substitute for clear renewal provisions. Before committing, find out whether you actually have a right to a further term, what conditions apply and how much renewal could cost. These factors help determine whether your initial investment makes financial sense.

1. Distinguish a right to renew from a possibility

A contract stating that the parties ‘may renew’ does not necessarily give you an enforceable right to continue. Likewise, an obligation to discuss renewal in good time is not the same as a commitment to continue the relationship.

When reading the contract, distinguish between three situations:

• Automatic renewal: the contract continues unless either party objects in accordance with the agreed procedure.
• An option to renew: you can claim a further term provided certain conditions are met.
• Renewal by mutual agreement: both parties must agree again; your consent alone is not enough.

Next, check the length of the new term. A long initial term does not mean that every renewal will last just as long. Also ask whether the existing agreement will continue or whether you will have to sign an entirely new contract.

Belgium has no comprehensive, standalone franchise law that sets a standard minimum term or an automatic right to renew. General contract law and the specific agreement are therefore important. Other relevant provisions include the specific pre-contractual disclosure rules and the rules on unfair terms in business-to-business contracts.

2. Make the conditions objective and verifiable

A right to renew may be worth little if its conditions remain vague. Wording such as ‘to the franchisor’s satisfaction’ or ‘subject to adequate commercial performance’ leaves considerable room for dispute.

For each condition, ask how it will be assessed, over what period and using which supporting documents. If turnover, quality checks or payment history are taken into account, the assessment criteria must be clear in advance. Also clarify how temporary breaches will be handled and whether you will be given a reasonable opportunity to remedy them.

Put at least the following points in writing:

• when you must apply for renewal and how;
• the deadline for the franchisor’s response;
• the specific conditions governing that decision;
• how any breaches will be notified and remedied;
• what happens if no response is received.

Do not assume that silence automatically means consent. This must be established by the applicable contractual provisions and rules.

Belgium’s rules on unfair terms in business-to-business contracts, set out in Book VI of the Code of Economic Law, are also relevant. A term that creates a manifest imbalance in the parties’ legal rights and obligations may be unfair. However, an unfavourable renewal condition is not automatically invalid. Have questionable provisions reviewed before signing, rather than relying on legal proceedings later.

3. Calculate the cost of a further contract term

Renewal may involve a new fee, compulsory training, equipment replacement or changes to the fit-out. So ask not only whether you can renew, but also what financial conditions will apply.

Draw up a table with three columns: the potential obligation, how the cost is calculated and when the amount will be known. Explicitly identify any costs that remain uncertain. A verbal assurance that renewal ‘usually costs very little’ is not a useful basis for an investment decision.

The combination of new investment and a short renewal term is particularly important. Will you have to carry out a major refurbishment just before renewal, even though the next term is short? If so, calculate whether that investment makes financial sense within the guaranteed term. Accounting depreciation is not the same as actually recovering the capital invested.

Also have your initial business plan assessed without assuming renewal. If the plan is only viable if the franchisor later agrees voluntarily, you are taking a significant risk that needs to be clear before you buy.

4. Plan for the statutory disclosure process too

Belgium’s pre-contractual disclosure rules are relevant when renewing a fixed-term franchise agreement. They are set out in Title 2 of Book X of the Code of Economic Law, Articles X.26 to X.33. They apply to commercial cooperation agreements that fall within the statutory definition, including franchise agreements.

For such a renewal, the franchisor must provide the draft new agreement and a simplified disclosure document, in addition to the original pre-contractual disclosure document. This must happen at least one month before renewal. An existing relationship does not remove the need for this preparation.

Plan separately for your contractual application deadline and this statutory disclosure period. The disclosure obligation does not, in itself, give you a right to renew. During negotiations, obligations under the current agreement also generally remain in force.

Practical conclusion: do not buy on the assumption that renewal will follow. Secure clear conditions, a timetable for decisions and a full understanding of the costs, and first assess your investment over the term you can actually rely on.