Buying a franchise: check your territory and online sales arrangements

An attractive business location does not automatically give you a protected customer base. Within a franchise network, shops, online stores and business sales channels may serve the same customers. If you are buying a franchise in the Netherlands, you therefore need to know exactly what your allocated territory covers. These checks will clarify where you can operate, what competition remains possible within the network and who earns revenue from an online order.

1. Turn a promised territory into a clear agreement

Phrases such as ‘your own territory’ or ‘exclusive location’ sound reassuring, but mean little without further detail. A territory may simply define where you can actively approach customers. Alternatively, it may mean that the franchisor will not open a second outlet there. These are different rights.

Ask for a map or a clearly defined list of postcodes to be attached to the agreement. Specify which version applies and what happens if postcodes or municipal boundaries change. Then check who is bound by the arrangement: just the franchisor, or other franchisees as well?

At a minimum, get answers to these questions:

• Can the franchisor open its own outlet, collection point or pop-up shop in your territory?
• Does the protection also cover other brands or retail concepts operated by the same organisation?
• Are railway stations, shopping centres, business premises or major corporate customers excluded from the arrangement?
• Does exclusivity depend on minimum turnover, opening hours or other performance requirements?
• When can protection be withdrawn, and will you first have an opportunity to remedy any shortcomings?

Compare the answers with both the contract and the operations manual. A sales brochure promising an exclusive territory provides insufficient certainty if the agreement contains broad exceptions. Ask for a clear order of precedence where documents conflict.

2. Find out who serves the online customer

A protected high street location may be entirely open to online competition. The central online shop may deliver to addresses in your territory, while you fund local advertising or handle returns. This is not necessarily a bad arrangement, provided responsibilities, revenue and costs are clear from the outset.

Work through a few customer journeys with the franchisor. One customer sees your local advert and then orders through the central website. Another buys online and collects from you. A third receives a home delivery but returns it to your outlet. For each scenario, ask:

• Who enters into the sales contract with the customer?
• Who is credited with the revenue?
• Who pays for delivery, returns, payment processing and customer service?
• Do you receive a fee for collections, advice or handling returns?
• Does the sale count towards the calculation of your franchise fees or performance targets?

Also ask how service enquiries are allocated. Is this based on postcode, availability or specialism, or through a paid allocation system? Ask what happens if you do not accept an enquiry straight away.

Record the outcomes in a schedule attached to the agreement. Also ask which reports you will receive so that you can check revenue allocation and payments. A promise that allocation will be ‘fair’ is not something you can verify.

3. Understand the legal protection and its limits

The Netherlands has a Franchise Act (Wet franchise), which has applied since 1 January 2021. Its provisions are set out in Book 7 of the Dutch Civil Code, Articles 7:911 to 7:922. They cover matters including pre-contractual disclosure and standards of good conduct for franchisors and franchisees. For franchisees established in the Netherlands, these statutory provisions cannot be departed from to their disadvantage.

However, the law does not automatically give you an exclusive territory. That requires specific contractual terms. Before the agreement is concluded, the franchisor must provide, among other things, the draft agreement and its attachments. It must also disclose other information that it knows, or can reasonably be expected to suspect, is relevant to your decision. Known plans for overlapping sales channels may be relevant here.

You also have a duty to investigate: take reasonable steps to avoid signing on the basis of incorrect assumptions. Ask explicitly about existing and planned outlets, central sales channels and exceptions to your territorial protection.

Dutch and European competition law also apply. Agreements concerning territories, customers and online sales are subject to limits. Restrictions on unsolicited orders from outside the territory and on effective use of the internet particularly require specialist assessment. Have a franchise lawyer review both the commercial implications and the legal permissibility of the terms.

4. Check what happens in practice before deciding

Use other franchisees’ contact details to investigate how the arrangements work in practice. Ideally, speak to operators with a comparable catchment area and those whose outlets are close to a territory boundary.

Do not simply ask whether they are satisfied. Ask about specific situations: a new outlet opening nearby, a corporate customer secured centrally or a return handled without compensation. How was the issue resolved, and which contractual provision proved decisive?

Finally, ask the franchisor to confirm in writing what expansion plans are known and who handles disputes over customer allocation. Unforeseen developments can never be ruled out entirely, but the process for consultation and dispute resolution can still be clear.

Practical conclusion: do not sign until your territory, exceptions and online customer flows have been set out in writing. A clear map, combined with verifiable arrangements for revenue and responsibilities, is worth more than a vague promise of ‘your own territory’.