Starting a franchise in Belgium: create a risk register

A successful business of your own can hide vulnerabilities that only become apparent when another entrepreneur adopts your business model. These might include a supplier who is difficult to replace, seasonal demand or a product that generates almost all your profit. A risk register helps you discuss these dependencies before signing franchise agreements. It also helps you build a franchise community in which partners understand the uncertainties they need to manage together.

1. Look for the vulnerabilities behind your strong results

A risk register is a working document that describes what could go wrong, what the consequences would be and how you will deal with it. It is not a list of general warnings such as ‘running a business involves risk’. It should identify the specific weaknesses in your business model.

Start with your existing business. Look beyond the annual accounts to complaints, stock shortages, staff turnover, lost customers and unexpected expenses. Ask employees which problems they regularly resolve without bringing them to management’s attention.

Then examine five types of dependency:

• Location: how much demand depends on a particular neighbouring business or facility, car park, school or office area?
• Product mix: do your results rely heavily on one product, service or category?
• Suppliers: what happens if an essential delivery is delayed or a supplier ceases trading?
• Customers: does a small number of customers account for a significant share of turnover?
• Competition: how vulnerable is the business model to a new competitor or an alternative sales channel?

In each case, distinguish between a local vulnerability and a risk inherent in the business model. A temporary road closure affects one outlet. An essential ingredient with no substitute could affect every partner.

2. Turn each concern into a risk you can assess

Use the same set of fields for every risk. This allows you to compare problems and check later whether your measures are actually working.

Record at least:

• the specific event and its possible cause;
• the outlets or activities affected;
• the available evidence, such as incidents or sales data;
• the likely consequences for operations, costs and customers;
• early warning signs;
• the measure to be taken, the person responsible and the review date;
• the uncertainty that remains after the measure has been implemented.

For example, rather than simply writing ‘supplier risk’, use: ‘Our core packaging materials are available from only one supplier; a disruption could hamper takeaway sales.’ Possible measures include a tested substitute, clear reorder thresholds and emergency stock. Check that any substitute is suitable both technically and commercially.

Assess likelihood and impact using simple categories such as low, medium and high. Do not present that assessment as a statistical certainty if you lack the data to support it. Instead, state explicitly when an estimate is based on limited experience.

A risk is not resolved simply because someone has proposed a measure. It remains open until you have adequately checked that the measure works.

3. Test measures before partners rely on them

Use your existing outlet to test risk controls. This need not cause major disruption to day-to-day operations. You could place an order with an alternative supplier, run through an emergency procedure or calculate how a temporary shift in the product mix would affect your gross margin.

Decide in advance what you want to learn. How quickly can a substitute be obtained? Does quality remain acceptable? What additional work is required? Who bears the cost? Keep the findings alongside the risk entry, including any limitations of the test.

Consider a lunch business that relies heavily on corporate orders. An offering aimed at local residents could reduce that dependency, but only if there is genuine demand for it. An attractive idea is not yet a proven fallback option.

Next, decide which measures will be organised centrally and which will be the franchisee’s responsibility. Avoid gaps where each party assumes the other will act. Include specific operating instructions in the manual and have a legal professional draft any necessary contractual provisions. The register itself does not replace these documents.

4. Link the register to your Belgian disclosure obligations

Belgium has specific rules on pre-contractual disclosure for commercial cooperation agreements. These are set out in Book X, Articles X.26 to X.33, of the Belgian Code of Economic Law. The statutory definition appears in Article I.11, 2°. Franchise agreements that meet the conditions for these rules to apply fall within their scope.

The prospective franchisee must receive the draft agreement and the pre-contractual disclosure document, commonly known in Belgium as the PID, at least one month before entering into the agreement. The PID contains important contractual provisions and socio-economic information.

This does not mean that a separate risk register is itself a legally required document. It is, however, a useful internal basis for gathering relevant information carefully. Ask a specialist legal adviser to assess which findings belong in the PID or the draft agreement. A standalone risk statement does not replace the statutory disclosure obligations, nor does it automatically make incomplete information acceptable.

Discuss material uncertainties in clear language, distinguishing between facts, assumptions and solutions that have yet to be proven. Update your register whenever an incident or new experience warrants it.

Practical conclusion: start with the five most significant dependencies in your existing business. Assign someone responsibility for each risk, test one control measure for each, and check before launching your franchise that your documents all reflect the same reality.