Buying a franchise in Belgium: plan your exit in advance

When buying a franchise, it is natural to focus on opening day. But your eventual departure deserves attention too: can you sell the business, what happens to the stock, and when does your personal guarantee end? A clear exit arrangement is part of a balanced relationship within a franchise network. Before buying, investigate how you could eventually transfer the business or close it, even if everything looks promising today.

1. Distinguish between selling, terminating and not renewing

These three routes have different consequences. When selling, you look for someone to buy your business. When terminating, you end the relationship in accordance with the applicable contractual and legal rules. When choosing not to renew, you allow a fixed-term agreement to expire, while complying with any notice requirements.

Do not assume you can leave at any time without paying compensation. A fixed-term contract may bind you for the agreed period. Leaving early may therefore require, for example, a contractual right to do so, an agreement between the parties or another valid legal basis.

Before signing, draw up a simple timeline showing:

• the start and end dates of the franchise agreement;
• the deadline and required form for notice of termination or non-renewal;
• the conditions for automatic renewal;
• the terms of your lease, financing arrangements and key supplier contracts.

That final comparison is essential. The end of your right to operate the franchise does not automatically end your commercial lease or loan. You could therefore still have payments to make after losing the right to use the brand. Have any mismatched end dates reviewed and discuss whether the agreements can be better aligned.

2. Check whether your business can actually be transferred

Owning your business does not automatically mean you can freely transfer the franchise agreement. Many agreements require the franchisor’s consent. The franchisor will generally want to assess whether a prospective buyer is suited to the franchise concept and can strengthen the network.

Ask which objective approval criteria apply. These might include financial standing, experience, training and personal commitment. Also ask how long the franchisor takes to review a complete transfer application and how it explains any refusal. Unclear procedures can delay a sale or put off a prospective buyer.

Next, have the following points clarified in writing:

• Will the buyer take over your existing agreement or have to sign a new one?
• Will the contract term, fees and territorial arrangements remain unchanged?
• Are any transfer fees, training costs or compulsory refurbishment costs payable, and by whom?
• Does the franchisor have a right of first refusal or another right to buy the business?
• Is consent also required if you sell shares rather than business assets?

The distinction between a share sale and an asset sale calls for legal and tax advice. A share sale generally leaves the company that signed the contract in place, but a change-of-control clause may still require consent.

Also ask about previous transfers. Speaking to a former franchisee can reveal how the procedure works in practice. Use that experience to test what you are being told, not as a substitute for checking your own contract.

3. Calculate the full cost of your exit obligations

The sale price is not the same as the net amount you keep. Ask your accountant to prepare an exit calculation for two scenarios: transferring the business to a successor and closing it permanently.

Include any potential termination payments, outstanding debts, removal of branding, reinstatement of the premises and disposal of stock. Check whether the franchisor must buy back stock or equipment, has the option to do so, or has no buy-back obligation at all. Record the valuation method and conditions too: otherwise, you could be left bearing the full cost of unsaleable or obsolete stock.

Review separately which obligations continue after you leave. A confidentiality obligation is different from a non-compete clause. A ban on carrying out certain activities could restrict your next career move. Its validity depends on the precise wording and applicable law, including competition law. Have its duration, geographical scope and prohibited activities specifically assessed.

Check personal guarantees separately. Leaving the business or reaching an agreement with the buyer does not necessarily release you from obligations to a bank, landlord or other creditor. Where necessary, obtain an express written release from the creditor concerned. When transferring the business, also consider employees and customer data: these are subject to their own legal requirements.

4. Have exit clauses reviewed under Belgian law

Belgium does not have a single, comprehensive franchise law governing every aspect of your exit. General contract law, competition law and relevant provisions of the Belgian Code of Economic Law (known by its Dutch abbreviation, WER) are important.

Book VI of the Code contains rules on unfair terms between businesses. A clause that creates a manifest imbalance between the parties’ rights and obligations may be unfair. There are also black and grey lists of clauses. An onerous exit clause is not automatically invalid; have its specific wording and context reviewed by a legal adviser. Unfair terms may be void.

Title 2 of Book X of the Code also governs pre-contractual information for commercial cooperation agreements. For a new franchise agreement covered by these rules, the draft contract and pre-contractual information document must be supplied at least one month before the agreement is concluded. Bear this in mind if your buyer needs to enter into a new agreement; do not set an unrealistic transfer date.

Practical conclusion: only buy once you can explain how you would later sell or close the business, what costs would remain and who would need to release you from your guarantees. Have unclear exit arrangements amended in writing before signing.