Buying a franchise in Belgium: scrutinise the non-compete clause

Buying a franchise means choosing to work within a franchise network. Protecting the franchise concept and shared know-how is part of that arrangement. But a non-compete clause can also restrict your existing business activities, other investments and future career options. Before signing, therefore, look beyond whether you are allowed to compete: establish exactly which activities the contract prohibits, who is bound by it and for how long.

1. Map out the restriction precisely

A non-compete clause may apply during the franchise relationship, after it ends, or both. Consider these periods separately. A restriction that makes sense while you are using the franchise concept does not automatically remain justified once the relationship ends.

Do not look only for a heading labelled ‘non-compete’. Restrictions may also appear under exclusivity, outside business activities, shareholdings or directors’ obligations. Read the definitions and schedules too: a broad definition of ‘competing activity’ may extend well beyond a directly comparable business.

For each clause, draw up an overview covering five questions:

• Activities: does it cover the same products and services, or any business targeting a similar customer base?
• People: does it bind only your company, or must you also take on obligations personally?
• Area: does the restriction apply around your premises, throughout Belgium or elsewhere?
• Duration: exactly when does the prohibition begin and end?
• Exceptions: are existing activities and passive investments expressly permitted?

Also note how the contract treats online activities. Under broadly worded terms, an online shop with no physical premises could still fall within a territorial restriction. Do not leave that interpretation unresolved until a dispute arises.

2. Understand the Belgian and European legal framework

Belgium has no single, comprehensive franchise law governing every aspect of the relationship. However, Title 2 of Book X of the Belgian Code of Economic Law contains specific rules on pre-contractual disclosure for commercial cooperation agreements, including franchise agreements that meet the statutory conditions.

Under Article X.27, you must receive the draft contract and the pre-contractual disclosure document at least one month before entering into the agreement. Use that period to have the non-compete restrictions reviewed as well. Receiving these documents does not mean that every clause they contain is legally valid.

General contract law, the Belgian rules on unfair terms between businesses in Book VI of the Code of Economic Law, and competition law also play a role. A clause that creates a manifest legal imbalance may be unfair under the applicable B2B rules. An unfavourable term is not, however, automatically prohibited.

For EU competition law purposes, Regulation (EU) 2022/720 on vertical agreements is relevant. It provides a block exemption subject to certain conditions. Non-compete obligations lasting indefinitely or for more than five years generally fall outside that exemption, although qualifications and exceptions apply. This does not automatically mean that the entire contract, or even the clause itself, is prohibited: an individual assessment may be needed.

Ask your adviser for two separate conclusions: what does the wording actually prohibit, and to what extent is that restriction legally enforceable?

3. Examine post-termination restrictions separately

A non-compete restriction that applies after the relationship ends deserves particular attention, as you may no longer receive income from the franchise but still face limits on your ability to earn a living.

The EU block exemption provides a narrow exception for this. Among other requirements, the restriction must relate to competing goods or services, be limited to the premises and land from which you operated during the agreement, be indispensable to protect transferred know-how, and last no more than one year. The regulation’s other conditions must also be met.

A one-year restriction covering the whole of Belgium is therefore not automatically exempt simply because of its duration. Conversely, a clause falling outside the block exemption is not automatically void without further analysis.

Ask which specific know-how needs protection and why a narrower restriction would be insufficient. Distinguish between non-competition and confidentiality: protecting confidential knowledge is not the same as imposing a general ban on practising your trade or profession.

4. Negotiate with your own business plan in mind

Compare your current activities with the contract wording. Disclose, for example, an existing shop, consultancy work or a stake in another business. For permitted activities, ask for a clear written exception in the agreement itself, not merely a reassuring email.

Then discuss realistic scenarios: the franchise concept is discontinued, the franchisor ends the relationship, or you later want to operate a different concept. Ask whether the same restriction applies in each scenario and what adjustments could be negotiated.

Make sure any exceptions are precisely worded. ‘With the franchisor’s consent’ offers little certainty without criteria and a deadline for responding. Nor should you assume that an overly broad clause can easily be struck out later: legal proceedings take time and may hold up your plans.

Practical conclusion: sign only when you can explain, for each non-compete clause, which activities it restricts, who it binds, where it applies and how long it lasts. Before committing to the franchise, have broad or unclear restrictions legally reviewed and their scope clearly defined in writing.