Setting franchise fees for your Belgian business

Turning your existing business into a franchise takes more than choosing an initial fee and a percentage of turnover. Your pricing model must fund the support you promise, be clear to prospective franchisees and leave their businesses sufficient financial breathing room. In a sustainable franchise network, fees are not simply a revenue stream: they reflect an agreement about the value each party provides. Here is how to build a sound fee structure for your Belgian franchise concept.

1. Start by costing what you actually provide

Do not start with other franchises’ fees. First, list all the services you will provide as a franchisor. Divide them into one-off activities and ongoing support.

At the outset, these might include training, guidance on fitting out the premises, access to the operations manual and support during the opening. Ongoing services might include site visits, further training, development of the franchise concept, software support and joint marketing.

For each service, record:

• the working hours and external costs involved;
• how often you provide it;
• who is responsible;
• whether costs increase with each location or are shared across the network.

Include your own time too. If you currently answer questions free of charge after closing time, overlooking that work will leave you with a franchise budget that is profitable only on paper.

Next, prepare a budget for a small franchise network. Do not immediately spread central costs across an optimistic number of future locations. Work out how you will fund training and support while only a few franchisees are contributing. A shortfall during this build-up phase calls for your own funding or a more measured pace of growth, not automatically a higher bill for the first applicants.

2. Give each fee a clear purpose

A transparent model shows franchisees what they are paying for. You do not have to invoice everything separately, but every charge should have a clear place in the structure.

The initial franchise fee can cover access to the franchise concept and an agreed start-up package. Specify how much training is included, what opening support you offer and which services cost extra. Do not try to pass all your historical development costs on to the first franchisee.

The ongoing franchise fee generally funds use of the franchise concept and continuing support. A fixed fee offers predictability but takes a proportionately larger share when turnover is low. A percentage of turnover varies with sales, whereas your support costs will not necessarily fall at the same rate. A combination is possible, provided you model the implications in advance.

A marketing contribution needs its own clearly agreed terms. Explain which campaigns it will fund, whether local advertising falls outside its scope and how you will report on spending. Do not promise a separately managed fund unless your organisation will actually provide one.

Check indirect charges too: margins on products franchisees must buy, software charges and any benefits received from suppliers. Assess the total cost package, not just the headline percentage. If you also earn income from mandatory supplies, include that in your profitability analysis.

3. Test affordability on both sides

Use the actual figures from your existing business as a starting point, but do not copy them unchanged. A franchisee may have different rent, staffing or financing costs. They will also incur costs that your own location does not currently pay separately, such as franchise fees.

Alongside a base-case scenario, prepare one with slower turnover growth and another with higher costs. In each case, calculate what remains after purchasing costs, staff, premises, all franchise contributions and other operating expenses. Then assess cash flow separately, including investment, loan repayments and taxes. Profit does not automatically mean there is enough cash available.

Ask two questions:

1. Can the franchisee pay themselves reasonably and build a financial buffer?
2. Can you continue to provide the support promised in the contract without relying on a constant stream of new initial franchise fees?

Pay particular attention to any minimum fee during the start-up period. It protects your income but can put pressure on a new location’s cash flow. A temporary phased fee arrangement may help, provided its duration, conditions and eventual full rate are clear from the outset.

Have an accountant check the calculations. Present scenarios as well-founded assumptions, not profit guarantees.

4. Set out calculation and payment terms clearly in the contract

Belgium specifically regulates the pre-contractual stage of commercial cooperation agreements, including franchising, through Book X, Title 2 of the Belgian Code of Economic Law. Under Article X.27, prospective franchisees must receive the draft contract and the pre-contractual disclosure document at least one month before the agreement is concluded. The financial terms must be explained accurately and consistently in these documents.

During this statutory period, as a general rule, no commitment may be entered into and no fee, sum or security deposit may be requested or paid, subject to the exceptions provided by law. Do not therefore ask for an initial franchise fee in advance to reserve a place. Have the payment schedule checked by a legal adviser.

The content of your agreement is also subject to general contract law and Belgian rules on unfair terms between businesses, among other provisions. Do not frame price adjustment clauses as an unlimited right to increase fees unilaterally.

For a turnover-based fee, define the calculation basis precisely: whether turnover includes or excludes VAT, how discounts and returns are treated, and how online sales and gift vouchers are handled. Also set out reporting, audit rights, invoicing, payment due dates and any index-linked adjustments. Make the VAT treatment clear.

Practical takeaway: before your first meeting with a prospective franchisee, prepare a fee schedule, a budget for the support you will provide and a profitability forecast for the franchisee. Only when all three align will you have a defensible pricing model.