Franchising in Belgium: agree transfer and exit arrangements upfront

If you want to expand an existing Belgian business through franchising, new openings are usually the first thing on your mind. Yet the end of a partnership also deserves attention before you sign your first agreement. A franchisee may want to sell their business, retire or stop trading. Putting workable arrangements in place upfront protects not only your franchise concept, but also trust across your franchise network.

1. Distinguish between three situations

A transfer, the expiry of the contract term and early termination are different situations. Avoid using a blanket clause that subjects them all to the same conditions.

For a transfer, the franchisee will usually want to realise the value of their business through a sale. Specify what consent is required, what information you must receive and how you will assess a proposed successor. Also distinguish between a sale of the business operations and a change in shareholders: the same company may continue to exist while control changes hands.

At the end of the contract term, it should be clear whether renewal is possible and, if so, how it works. Set out when the parties should begin discussions, without automatically promising a right to renewal. Align that timetable with major investments: a compulsory refurbishment shortly before expiry could lead to disputes.

Early termination may arise, for example, from serious breaches or a mutually agreed decision to end the relationship. Have the agreement specify when formal notice of breach and a period to remedy it are required, and when immediate termination is legally defensible.

Draw up a short timeline for each situation. Who notifies whom, what documents are needed and who makes the decision? This makes the legal arrangements usable in day-to-day practice.

2. Design a workable transfer procedure

As a prospective franchisor, you will want to prevent an outlet from passing into the hands of an unsuitable operator. At the same time, your consent procedure should not needlessly obstruct a sale. Choose objectively assessable criteria rather than an unrestricted right of veto.

Your procedure could cover:

• the experience, financial resources and training a successor needs;
• the information the seller and proposed successor must provide;
• the agreed timeframe for responding to a complete application;
• how you will explain any refusal;
• whether the existing agreement will be transferred or a new one signed;
• who pays any training and transfer costs.

Make separate arrangements for any right of first refusal. Have these specify exactly when the right applies, how the sale terms must be communicated and how long you have to respond. A right of first refusal is not a right to set an arbitrary purchase price yourself.

Do not overlook the premises. Transferring the franchise agreement does not automatically transfer the commercial lease, permits or supplier contracts. Have the parties involved investigate these dependencies before committing to an unconditional sale.

3. Check the arrangements against Belgian law

Belgium has no standalone law governing the entire franchise agreement. However, Book X, Title 2 of the Belgian Code of Economic Law (WER) contains specific rules on pre-contractual disclosure for commercial cooperation agreements. These are also relevant to franchising.

As a general rule, the prospective franchisee must receive the draft agreement and the pre-contractual disclosure document, known in Dutch as the PID, at least one month before the agreement is signed. Your exit and transfer arrangements should therefore not be introduced only after that disclosure period. Have key provisions on termination and its consequences properly incorporated into the pre-contractual documentation.

A transfer or renewal calls for a fresh legal review. Where a new franchisee is involved, you need to assess the applicable disclosure procedure; for certain renewals, new agreements between the same parties and amendments, the Code provides for a simplified procedure. Do not assume that an old PID covers every subsequent transaction.

Other applicable provisions include general contract law and the rules on unfair terms between businesses. Unilateral decision-making rights, excessive charges and far-reaching restrictions can create legal problems.

A post-termination non-compete clause is not a standard safeguard you can use without limits either. Its validity depends, among other things, on the applicable competition law and the scope and necessity of the restriction. Have a Belgian franchise lawyer review the arrangements as a whole, including any overlap with commercial lease or distribution agreement rules.

4. Prepare the practical exit process

The end of a contract does not, in itself, ensure an orderly closure. Before opening your first franchise outlet, draw up an exit checklist with responsibilities and deadlines.

Describe how branding will be removed, access to systems withdrawn and confidential know-how returned or deleted. Distinguish between franchise materials and records the business owner is legally required to retain.

Also set out what happens to stock, hired equipment, outstanding orders, gift vouchers and complaints. Do not promise an automatic stock buy-back without agreeing on condition, shelf life, price and payment.

Customer databases cannot automatically be passed to you or a successor either. Check the lawful basis under data protection law, the information that must be provided and access rights. Also agree who will notify customers, so they know whom to contact about outstanding commitments.

Practical takeaway: address transfers, contract expiry and early termination separately. Have the legal arrangements reviewed and link them to a single, workable exit checklist. This gives your franchise network a clear and balanced foundation from the outset.