Buying a franchise: check who you are contracting with

A familiar brand name inspires confidence, but it does not tell you which company you are entering into a franchise agreement with. Behind a single franchise network there may be an overseas brand owner, a Dutch master franchisee and separate service providers. Anyone joining a franchise network needs to know who is responsible for what. Before signing, map out the legal structure surrounding your outlet.

1. Identify the company behind the brand name

Start with the full legal name in the draft agreement. Compare it with the details on quotations, invoices, information packs and any supplementary agreements. A trading name may differ from the entity’s official legal name. That is not necessarily a problem, but there should be a clear explanation for the difference.

For a Dutch contracting party, obtain an up-to-date extract from the Dutch Business Register. Check the legal form, registration number, registered business address and who is authorised to sign on the company’s behalf. If signatures from more than one authorised person are required, check that all the necessary people actually sign. If a power of attorney is being used, ask to see its terms and scope.

For an overseas company, check the relevant business register in its home jurisdiction. If necessary, ask a specialist to assess the registration and the authority of those representing the company.

Then compare three things:

• Which company is promising you the franchise rights and the associated services and support?
• Which company is signing the agreement?
• Which company must you pay?

There may be a commercial reason for any differences. Ask for that reason in writing. Any payment to another group company should clearly satisfy your contractual payment obligation, so there can be no subsequent dispute about whether you have paid.

2. Map out any master franchise arrangement

An overseas franchisor does not have to establish a business in the Netherlands to enter into franchise agreements there. It can work directly with Dutch franchisees. Another option is a master franchise structure, under which a local company is authorised to expand the network within an agreed territory.

In that case, the Dutch master franchisee may be your franchisor, while the international brand owner is not a party to your agreement. Do not assume that the international head office must automatically honour every promise made by your local contracting party.

Ask for a simple organisational chart showing the legal entities involved and their roles. Ask for an explanation of the following:

• What gives your contracting party the authority to enter into franchise agreements?
• When does that authority expire, and how does this compare with the term of your agreement?
• What happens to your agreement if the relationship between the brand owner and the master franchisee ends?
• Are arrangements in place for the brand owner or a successor to take over, or would this still need to be negotiated?

You are not necessarily entitled to receive the full underlying agreement. However, ask for sufficient written evidence of the authority and dependencies that affect your business. A promise of continuity is only useful if it is clear who is bound by it.

3. Check which Dutch protections apply

The Netherlands has specific franchise legislation: the Franchise Act, incorporated into Title 16 of Book 7 of the Dutch Civil Code, Articles 7:911 to 7:922. These provisions have applied since 1 January 2021 and include disclosure obligations and rules designed to protect franchisees within the relationship.

For a franchisee established in the Netherlands, the agreement cannot depart from this title to the franchisee’s detriment, regardless of which law the contract specifies as governing it. Choosing foreign law therefore does not simply remove these protections. However, this does not mean that every other contractual issue will automatically be assessed solely under Dutch law. Have an international agreement reviewed specifically on this point.

The pre-contractual disclosure obligation is relevant to your checks on the contracting party. Ask explicitly about dependencies you should reasonably be aware of before signing, such as restrictions on its authority to make the franchise system available to you.

The Netherlands has no separate compulsory franchise register. The standard registration of Dutch businesses with the Netherlands Chamber of Commerce (KVK) is not the same as approval of a franchise system. A registration number therefore does not prove that the proposed arrangement has been assessed on its merits.

4. Make responsibilities clear and verifiable

Before signing, draw up a list identifying the contracting party responsible for each key obligation. This might include access to systems, training, supplies and ongoing support. Also note whether that party signs the agreement itself or is merely named as a service provider.

Suppose a separate group company supplies the point-of-sale software. Who must arrange a solution if that service stops? Naming a supplier is not the same as placing a clear obligation on your franchisor. Make sure the agreement records who remains accountable and what arrangements apply.

If anything is unclear, ask for the agreement to be amended or for an appropriate supplementary agreement. Have a franchise lawyer assess whether a guarantee or an additional party’s signature genuinely provides the protection you need.

Practical conclusion: only sign once you can identify your contracting party’s legal name, signing authority and responsibilities. You are joining a franchise network, but your specific rights must be clearly documented and enforceable against identifiable parties.