Starting a franchise in Belgium: setting your fees

Are you looking to expand your existing Belgian business through franchising? You need to be able to explain what franchisees pay for, how you calculate the fees and what they receive in return. A clear fee structure helps build trust across your franchise network. So rather than starting with a percentage that sounds attractive, begin with an overview of costs, services and income.

1. Separate initial costs from ongoing services

The initial franchise fee and ongoing fees serve different purposes. A one-off fee might cover the transfer of know-how, initial training and support with opening the business. Recurring royalties may cover the right to use the franchise concept and ongoing commercial or technical support.

Start by drawing up an internal cost breakdown. For each activity, record who does the work, how much time it takes and whether the cost is one-off or recurring. Use actual figures from your existing business, supplemented by clearly identified assumptions for activities you do not yet carry out.

Then divide your offering into three groups:

• Included at launch: for example, basic training and the initial set-up of access to systems.
• Included throughout the relationship: for example, guidance on implementing the franchise concept, updates to working methods and routine support.
• Charged separately: for example, additional training or extra support on request.

Avoid inadvertently charging twice for the same service. If training is paid for partly through the initial fee and partly through a separate charge, specify exactly which elements each payment covers.

You do not have to base every fee solely on cost. The right to use the franchise concept also has value. However, make it clear that paying a fee does not come with any promise of turnover or profit.

2. Choose a workable calculation method

A fixed recurring fee offers predictability, but places a proportionately greater burden on businesses with lower turnover. A turnover-based royalty moves in line with sales, whereas your support costs will not necessarily fall at the same rate. A combination is possible, but requires particularly clear explanation.

Test your chosen model at different turnover levels. In each case, consider both affordability for the franchisee and the resources you will retain to deliver the agreed support. A model that only works if every outlet performs strongly from day one is vulnerable.

For a turnover-based fee, the calculation basis must be unambiguous. Specify, among other things:

• whether turnover is calculated excluding VAT;
• how discounts, refunds and cancelled sales are treated;
• when gift vouchers count towards turnover;
• how online orders are allocated to an outlet;
• whether commissions charged by ordering platforms reduce the calculation basis.

Work through a few hypothetical transactions, from the till record to the royalty invoice. Ask someone who was not involved in designing the model to repeat the calculation. If you arrive at different amounts, the definition is not yet precise enough.

Also describe the reporting period, submission deadline and procedure for correcting errors retrospectively. This helps prevent a fee that is reasonable in principle from causing disputes in practice.

3. Make indirect fees visible

Not all franchisor income appears on an invoice labelled ‘royalty’. It may include income from mandatory supplies, supplier rebates or payments linked to systems that franchisees are required to use. Map these income streams too, before approaching prospective franchisees.

Belgium has specific pre-contractual rules for commercial cooperation agreements in Book X, Title 2 of the Belgian Code of Economic Law, particularly Articles X.26 to X.33. Franchise agreements that meet the statutory definition fall within their scope.

Under Article X.28, any agreed direct fee must be clearly described in the pre-contractual information document, commonly known in Belgium as the PID. Any agreed indirect fee and the method used to calculate it must also be disclosed.

For each income stream, prepare a record identifying the payer, recipient, calculation basis and trigger for payment. Seek legal advice on which income streams must be disclosed as indirect fees. For mandatory purchases, also clearly identify the costs that prospective franchisees need to include in their operating budgets.

The draft agreement and PID must be provided at least one month before the agreement is concluded. For a franchisee joining for the first time, you must not request or receive an initial fee, reservation payment or security deposit before that period has expired. Giving the payment a different name does not change this rule.

4. Check that your fee schedule is consistent

Bring all fees together in a single internal master schedule. Compare it with your draft contract, PID, sales presentation and illustrative financial calculations. Amounts, definitions and included services must be consistent throughout.

For each fee, also state the payment due date, any indexation method, VAT treatment and conditions for additional charges. Ask your accountant to check the calculations and tax treatment, and your legal adviser to review the contractual wording and disclosure obligations.

Practical conclusion: only introduce your fees once prospective franchisees can independently establish what they will pay, how the amount is calculated and what they will receive in return. That provides a solid foundation for a lasting relationship within your franchise network.