Buying a franchise: check how fixed fees are index-linked

A fixed monthly fee only gives you certainty if you also know how it can increase. When buying a franchise, indexation clauses therefore deserve particular attention. Clear agreements on price adjustments are important for a lasting franchise relationship. This guide helps you identify automatic increases in fixed fees, calculate their impact and discuss them before signing.

1. Find every clause covering annual increases

Indexation means adjusting an amount according to an agreed benchmark, such as a consumer price index published by Statistics Netherlands (CBS). This is different from a franchisor setting a new price at its own discretion. A contract may allow both, meaning the same fee could rise through more than one mechanism.

Do not just review the fee schedule. Search the agreement and its appendices for terms such as ‘indexation’, ‘price adjustment’, ‘annual review’ and ‘passing on costs’. Note which rules on increases apply to each fixed fee.

Draw up an overview covering:

• the starting amount and whether it excludes VAT;
• the service or obligation you are paying for;
• the first adjustment date and the frequency thereafter;
• the index or other basis used for the calculation;
• any minimum increases, caps and additional surcharges.

Pay particular attention to cross-references between documents. A fee schedule may state a fixed amount, while another clause permits annual adjustments. Ask which provision takes precedence if the wording is inconsistent. Have any ambiguities resolved in the contractual documents, not just in an explanatory email.

2. Check what the Dutch Franchise Act requires

The Dutch Franchise Act has applied in the Netherlands since 1 January 2021 and is incorporated into Title 16 of Book 7 of the Dutch Civil Code. Article 7:913 of the Civil Code requires the franchisor to provide certain information before the agreement is concluded, including an overview and explanation of the fees, surcharges, investments and other financial contributions you must pay.

Any provision governing increases in those payments is relevant to your financial assessment. So ask not only about the current rate, but also about the contractual method for calculating future amounts. The draft agreement and its appendices must also be provided in advance. Article 7:914 of the Civil Code requires the relevant information to be supplied at least four weeks before the agreement is concluded.

The Dutch Franchise Act does not set a general maximum annual index-linked increase. An increase is therefore not automatically permitted simply because it is called an ‘inflation adjustment’, nor is it automatically prohibited because your turnover is falling short. The agreed wording and the circumstances remain decisive.

Also distinguish between applying an existing indexation clause and introducing a new change to the franchise system or agreement. The statutory right of consent for certain changes to the franchise system is not a general right to veto every fee increase. Ask a lawyer specialising in franchise law to assess which rules apply to a particular adjustment.

3. Test the formula behind the new amount

A reference to ‘inflation’ is not enough for you to check an invoice yourself. You need to be able to identify the index series, reference months and calculation method used. Also ask what happens if the chosen index is no longer published.

Ask the franchisor to provide a worked example using the proposed starting fee. Check four points:

The base amount. Is each adjustment applied to the most recently increased fee, or does the original amount remain the basis? If the adjusted fee is increased each year, previous rises compound.

The first increase. Could the amount rise shortly after you open? A fixed annual adjustment date may mean your starting fee applies for only a few months.

A negative index movement. Does the fee fall accordingly, stay the same or still rise by a minimum amount? A floor makes the arrangement financially different from a straightforward link to the index.

Double charging. Can the franchisor pass on higher staffing, energy or supplier costs on top of indexation? Ask how it prevents the same cost increase from being reflected twice in your fee.

Finally, check whether advance notice is required and how much time you have to adjust your budget. A clear notice should state the new amount, the calculation and the date it takes effect.

4. Budget for the impact and negotiate specific changes

Ask your accountant to calculate the fixed fees over the full initial contract term. Use several assumptions for future indexation and explicitly describe them as scenarios, not forecasts. Include a separate scenario in which turnover remains unchanged: higher fees will not necessarily be offset by additional revenue.

Look at the effect on both your annual profit and your monthly cash flow. An individual increase may seem modest, while several fees rising together could put noticeable pressure on your income.

Then discuss specific improvements: a clearly defined index, a later first adjustment date, an agreed cap or the exclusion of overlapping cost surcharges. These are points for negotiation, not automatic statutory rights. Have any agreed changes incorporated into the final documents and checked by a lawyer.

Practical conclusion: only sign once you can explain, for every fixed fee, when it will increase, how the new amount is calculated and what that means for your budget.