Buying a franchise: make the most of the four-week consideration period

Buying a franchise means joining a franchise network while taking on the risks of running your own business. The period before signing therefore deserves as much attention as your launch plan. The Dutch Franchise Act gives you at least four weeks to assess key information. This guide explains how to use that time for a structured review, rather than simply waiting to sign.

1. Establish when the consideration period actually starts

The Dutch Franchise Act, incorporated into Book 7, Title 16 of the Dutch Civil Code, governs, among other things, the information that must be provided before a franchise agreement is concluded. Article 7:913 sets out what information the franchisor must provide. Article 7:914 requires a period of at least four weeks between the provision of that information and the conclusion of the agreement.

That period does not simply begin with your introductory meeting or the arrival of a brochure. The legally required information must have been provided. This includes the draft agreement and its appendices, details of financial obligations and relevant financial data. If a key element is missing, do not simply assume that the signing date proposed by the franchisor is appropriate.

Ask for a dated document list and keep every version. Record when you received each file and which questions remain unanswered. If you are unsure whether missing information affects the start of the period, ask a lawyer specialising in franchising to assess whether it has begun.

Important: this is a consideration period before signing, not a general right to cancel a signed franchise agreement free of charge within four weeks.

2. Week one: organise the information for review

Start with an index that gives every document a clear place. A practical structure is:

• Contract documents: the draft agreement, appendices and applicable rules or manuals.
• Financial commitments: the initial franchise fee, ongoing fees, investment requirements and other mandatory contributions.
• Financial background: information about the franchisor’s financial position and data relating to the proposed outlet or comparable outlets.
• Working relationship: arrangements for consultation, contact details for other franchisees and, where applicable, their representatives.
• Information sharing: arrangements specifying which turnover-related data you will receive and how often.

Request any missing documents in writing. If an appendix will only be made available after signing, seek advice on whether you have sufficient information beforehand to understand your obligations.

Information sharing also works both ways. You must inform the franchisor of your financial position in good time, insofar as that information is relevant to entering into the agreement. Use up-to-date, verifiable figures and make clear which funding arrangements have not yet been finalised.

3. Week two: scrutinise the outlet’s figures

Ask an independent accountant or financial adviser to distinguish between actual results, assumptions and forecasts. The Dutch Franchise Act does not automatically require the franchisor to prepare a turnover forecast for you. However, obligations to disclose relevant financial data do apply.

Have figures from other outlets been used? Ask why those outlets are considered comparable. An established location with a loyal customer base does not necessarily tell you much about a new outlet. Consider the catchment area, floor space, opening hours, staffing levels and local competition.

Then work through three questions:

1. What costs will arise before the first customer pays?
2. Which costs will continue if turnover is lower than expected?
3. How much financial headroom will remain for setbacks and your personal living expenses?

Calculate cash flow as well as profit. Loan repayments, building up stock and the timing of payments can absorb cash without being reflected in profit in the same way.

Discuss any uncertainties directly with existing franchisees. Ask, for example, which start-up costs they underestimated and how quickly their outlet began generating sufficient cash. Their experience can help you test your assumptions, but it is no guarantee of your own results.

4. Weeks three and four: monitor commitments and make your decision

During the statutory consideration period, the franchisor may not amend the draft contract unless the change is in your favour. Nor may the franchisor enter into the franchise agreement, or any agreements inseparably linked to it, with you. A confidentiality agreement is an exception. The franchisor must also not induce you to make payments or investments connected with the proposed franchise agreement.

Be alert, therefore, to requests for a reservation payment, compulsory equipment purchases or pressure to sign a linked agreement in advance. The label attached to a payment does not determine whether it is permitted. Have its substance and connection to the franchise agreement assessed.

Keep an eye on your own agreements with third parties too. The consideration period does not automatically make a lease or finance agreement that you enter into independently non-binding. Discuss suitable conditions with your adviser in case the franchise agreement or financing does not go ahead.

Finally, bring all outstanding issues together in a single decision document. For each issue, record the answer, the supporting evidence and the implications for your budget or contract. Have any verbal assurances that influence your decision confirmed in writing.

Four weeks is a minimum, not a deadline for signing. If essential questions remain unanswered, postpone your decision. If documents are amended, seek advice on what this means for the statutory period.

Practical conclusion: sign only when the documentation is complete, the figures have been independently reviewed and your obligations are clear. Use the consideration period to make an informed decision about joining the franchise network.