Starting a franchise network in Belgium: choosing your contracting entity

Your existing business has customers, a recognisable concept and workable processes. But which entity will sign the franchise agreement? It will not necessarily be the same entity that currently runs your shop or service business. Making this decision in advance clarifies who grants rights, receives fees and is responsible for providing support. This gives your future franchise network a clear legal foundation.

1. Map out your existing structure

Start with an overview of what already exists, rather than setting up a new company. A trading name above the door does not tell you which individual or legal entity is legally responsible for the business. Different outlets operating under the same name may also belong to different entities.

Create a simple table listing the entity involved, its Belgian enterprise number and the relevant agreements for each part of the business:

• Who operates your existing business and any pilot outlet?
• Who owns the trade mark or holds the rights to use it?
• Who developed the operations manual, software and training materials?
• Which entity employs the people who will support franchisees?
• Who currently enters into agreements with suppliers and service providers?

Check this against contracts, registrations and invoices, rather than relying solely on established internal practices. For example, a software subscription for your shop does not automatically give you the right to make that software available to independent franchisees.

The aim is to map out rights and responsibilities. This will help you identify any missing agreements before promising another business owner access to your franchise concept.

2. Compare using your existing entity with setting up a separate franchise company

Consider whether your existing entity should also become the franchisor, or whether a separate company would be more suitable. There is no general legal requirement to set up a separate franchise company in Belgium.

Operating through your existing entity can keep things straightforward: its experience, staff and day-to-day operations remain closely connected to the franchise activities. However, the same entity will then carry both the obligations towards franchisees and those associated with your own outlet.

A separate company can provide a clearer division of responsibilities. For example, it could enter into franchise agreements and organise support, while another entity operates your own outlet. But this structure only works if the new contracting party genuinely has access to the necessary rights, resources and people.

Ask an accountant and a legal adviser to compare both options. Discuss administration, tax, liability and agreements between related entities. An additional company does not automatically ring-fence every risk; guarantees and obligations between the entities can affect the outcome.

Test each option against the same question: can this entity fulfil the contractual promises we make to the franchisee in its own right? If support still depends entirely on informal help from your existing business, the structure is not yet complete.

3. Align the contracting party with the disclosure obligations

Belgium has specific pre-contractual rules for commercial cooperation agreements, including franchising. These appear in Title 2 of Book X of the Belgian Code of Economic Law, particularly Articles X.26 to X.33. General contract law and applicable competition rules are also relevant.

The party granting the right to use the commercial concept must provide the prospective franchisee with the draft agreement and the pre-contractual disclosure document, known locally as the PID, at least one month before the agreement is entered into. When choosing your structure, the key point is to establish clearly which entity grants that right.

Make sure the franchisor’s identity is consistent across the draft agreement, the PID and accompanying communications. Include the correct legal name, legal form, enterprise number and address. Also check who is authorised to sign on the entity’s behalf.

Distinguish between the history of your franchise concept and that of the contracting party. A newly established franchise company does not automatically have the operating track record of your existing business. State clearly which entity operates any pilot outlet and which entity the information you provide relates to.

What if you change the contracting party during discussions? Do not treat this as a simple administrative name change. Seek advice on which documents must be supplied again and what this means for the remaining pre-contractual process.

4. Check that the day-to-day arrangements work

Before making your first offer, walk through a hypothetical franchise relationship. The prospective franchisee receives documents, later signs the agreement, undergoes training, pays fees and requests support. At each stage, note which entity acts and on what legal basis.

Check four points:

• Use of the franchise concept: does the contracting party actually have the authority to grant the promised rights?
• Support: are agreements in place if staff employed by another entity provide it?
• Invoicing: do the invoicing entity and payment instructions match the agreed goods and services?
• Continuity: can support continue if your own outlet relocates, closes or is sold?

Put the necessary agreements between your entities in writing. Make sure franchisees know who their point of contact and contracting party are, without burdening them with the details of your entire internal organisation.

Practical conclusion: first decide which entity will be the franchisor, then check that it has both the right to offer the franchise concept and the ability to deliver on its promises. Only then should you finalise the documents for prospective franchisees.