Buying a franchise in Belgium: test the turnover forecast

A well-known brand name does not make a turnover forecast reliable. Anyone joining a franchise network in Belgium needs to understand what the expected sales are based on. An attractive spreadsheet may assume an exceptional outlet, an unrealistically quick launch or customers who simply are not there locally. Targeted checks help you distinguish well-founded expectations from a persuasive sales pitch.

1. Ask which outlets the figures are based on

Start not with the turnover figure, but with its source. Ask whether the franchisor is presenting historical results, calculating an average or providing an estimate for your future business. These are different types of information, each carrying a different evidential weight.

For historical figures, ask about the period covered and the characteristics of the outlets concerned. A shop that has spent years building a customer base is not necessarily a useful comparison for a new opening. An outlet owned by the franchisor may also operate differently from a business run by an independent franchisee.

Ask for clarification on at least the following points:

• Do the figures include or exclude VAT?
• Do they cover full financial years, or have shorter periods been extrapolated?
• Which outlets are included, and which are excluded?
• Have outlets that closed or changed hands been included?
• How do location, floor area, opening hours and sales channels differ?
• What proportion of turnover comes from temporary promotions or one-off contracts?

Alongside the average, ask for the spread of results and, if available, the median. A few exceptionally strong outlets can push up the average. Anonymised data may be sufficient: you do not need access to confidential individual business records to assess the basis for comparison.

2. Rebuild the turnover forecast for your location

A forecast becomes testable when you break it down into specific sales activity. For a shop, this might mean visitor numbers multiplied by the proportion who buy and their average spend. For a service business, you would be more likely to look at available appointment slots, utilisation and revenue per appointment.

Test each component locally. Observe the area on different days and at different times. Look at accessibility, visibility, competitors and whether your target customers are present. A busy location does not automatically mean people are ready to buy.

Check whether the turnover is operationally achievable, too. How many customers can you actually serve with the planned staffing levels? Are there enough workstations, treatment rooms or delivery slots? A sales target that can only be reached with more staff than budgeted gives a distorted picture of profitability.

Also distinguish between new turnover and sales shifting between channels. Online orders from your area do not automatically count towards your outlet's turnover. Ask who records the sale, who fulfils it and what payment you receive. Include only the revenue your business is entitled to under the agreed arrangements.

Finally, set out the first few months separately. Applying an established outlet's annual turnover from opening day conceals the time needed to build awareness and repeat custom.

3. Seek confirmation beyond the sales presentation

Discuss your assumptions with several franchisees. Do not rely solely on contacts the franchisor puts forward as examples. Where possible, seek a mix of recent starters and established operators whose locations resemble yours.

Ask specific questions: what sales expectations were they given beforehand, how did the launch go, and which local conditions made a difference? Also ask how many hours they personally work in the business. Strong turnover says little about how attractive a business is if it consistently requires substantial unpaid work from its owner.

Publicly available annual accounts can provide further clues, but they have limitations. Not every business publishes the same level of detail, and one company may cover several activities or outlets. Ask your accountant to assess what you can genuinely infer from them.

Then prepare a base-case scenario and a downside scenario. For example, reduce customer traffic or assume a slower build-up of repeat purchases. Calculate not just turnover, but also gross margin and profit or loss after staffing costs, rent and franchise fees. This will show you which assumption has the greatest impact on viability.

4. Record assumptions and statements in writing

Belgium has no separate law governing the franchise agreement in its entirety. However, Title 2 of Book X of the Belgian Code of Economic Law, Articles X.26 to X.33, contains specific rules on pre-contractual information for commercial cooperation agreements. Where these rules apply, you must receive the draft agreement and the pre-contractual information document at least one month before entering into the agreement.

This disclosure obligation does not automatically turn a turnover forecast into a turnover guarantee. General contract law and the particular circumstances also affect the significance of statements and any potential liability.

Keep presentations, emails and calculations, recording their dates and version numbers. Ask for written confirmation of which figures are historical facts and which are assumptions. Have important answers included in the final documentation. Check with a lawyer how the agreement treats forecasts, appendices and earlier statements. Do not assume that a verbal promise offers the same clarity as an express contractual provision.

Practical conclusion: do not buy a franchise on the strength of a single turnover figure. Decide only once you understand the comparison data, have tested local sales capacity and your accountant also considers the downside scenario viable.