Launching a franchise in Belgium: plan an orderly exit

If you want to turn an existing business into a franchise, opening new outlets is usually the first thing on your mind. Yet the end of a franchise relationship also deserves attention from the outset. A franchise network benefits from clear arrangements for when an operator leaves. A practical exit plan protects continuity for customers and prevents both parties from discovering only at the point of departure which tasks, costs and responsibilities have not been allocated.

1. Distinguish between expiry, termination and transfer

Not every exit follows the same course. An agreement may expire without renewal, the parties may jointly decide to end it, or a dispute may arise over a breach. Selling the business also calls for a different approach from closing it permanently.

Before entering into your first franchise agreement, therefore, set out several distinct scenarios. For each one, note which decisions are needed, who is involved and what the operational consequences will be. Do not confuse this overview with a separate right to terminate the agreement: that right must have a legal basis in the contract and the applicable law.

In particular, distinguish between three events:

• The end of the right to use the franchise system: when must the operator stop using it?
• The end of trading: will the business close, or continue independently?
• The transfer of the business: will someone acquire its assets, operations or shares?

These events do not necessarily coincide. Selling a business, for example, does not automatically entitle the buyer to continue under the franchise agreement. Have any consent requirements and transfer conditions clearly documented, without promising automatic approval.

2. Map out all outstanding obligations

Use your existing outlet as a test case. Imagine that it leaves the franchise network on a chosen date. Which obligations would still be outstanding? Look beyond the final royalty invoice.

Draw up an exit checklist covering at least the following:

• outstanding orders, advance payments and services still to be delivered;
• complaints, returns and warranty claims;
• gift vouchers, credit balances and loyalty benefits;
• stock, hired equipment and items on loan;
• software subscriptions, access rights and supplier contracts;
• unpaid invoices and the final reporting period.

For each item, specify who is party to the relevant contract, who will organise its resolution and what information they will need. An internal arrangement between franchisor and franchisee does not automatically change customers’ rights or obligations towards suppliers.

Also decide how stock will be handled. Is there an agreed buy-back arrangement, which goods qualify and how will their condition be assessed? Avoid vague promises such as ‘we’ll take everything back’. Agree any valuation method and practical inspection procedure in advance.

Test the checklist with a member of staff who was not involved in drafting the franchise agreement. Can they identify who will help the customer with each outstanding order? If not, a workable arrangement is still missing.

3. Embed the exit arrangements in the Belgian contract documents

Belgium has no separate law governing the franchise agreement in its entirety. General contract law applies. In addition, Title 2 of Book X of the Belgian Code of Economic Law (WER) contains specific rules on pre-contractual disclosure for commercial cooperation agreements, including franchises.

Under Article X.27 WER, the prospective franchisee must receive the draft agreement and the pre-contractual disclosure document, known by its Dutch abbreviation PID, at least one month before entering into the agreement. Article X.28 WER specifies what information the PID must contain. The important contractual provisions also include arrangements for the end of the relationship, such as termination conditions and their consequences.

Have a legal adviser check that the exit arrangements are correctly reflected in the draft agreement and, where legally required, in the PID. Do not bury financial consequences or significant obligations solely in an operational checklist. A checklist helps with implementation, but does not replace a clear contractual basis.

During the statutory period, as a rule, no commitments may be entered into and no payments or security may be requested or provided, subject to statutory exceptions. So do not ask for an exit security deposit during initial discussions. Also have any termination charges checked for validity and proportionality; do not simply copy them from another contract as a standard solution.

4. Organise a verifiable handover

Turn the legal arrangements into a closing procedure with named responsibilities and supporting records. Schedule the removal of franchise branding, the withdrawal of access rights and the return of materials in line with the agreed end date. Coordinate these steps with the handling of outstanding customer obligations.

Agree in advance who will inform customers and through which channels. A neutral message explaining the last day of trading and whom to contact about existing orders is more useful than discussing the reasons for the departure. Do not share more personal data than is necessary and lawful.

Finish with a joint summary: what has been completed, what remains outstanding and who will follow it up? A signed handover report can record the factual position. Make clear whether it merely confirms receipt and completion, or also contains legal agreements; have the latter reviewed separately.

Practical conclusion: before entering into your first franchise agreement, work through one complete exit on paper. Every task without an owner and every cost without a clear agreement is an issue you still need to resolve.