Buying a franchise: share your financial information carefully

When buying a franchise, you rightly expect transparency from the franchisor. But sharing information works both ways: your own financial position can also determine whether you can make a sound start. A good franchise relationship therefore begins with relevant, accurate information, without you simply handing over all your personal financial records. How do you decide what is needed, and avoid misunderstandings about your financial resources?

1. Understand your own statutory duty to provide information

The Dutch Franchise Act has been in force since 1 January 2021. Its provisions are set out in Book 7, Title 16 of the Dutch Civil Code. Article 7:913(1) requires a prospective franchisee to provide the franchisor, in good time, with information about their financial position insofar as it is reasonably relevant to entering into the franchise agreement.

This is not an unlimited obligation to share every financial detail. It concerns information that enables the franchisor to assess whether proceeding with the relationship is financially sound. Examples include the availability of your own funds and financial commitments that affect your ability to start the business.

The franchisor also has a separate, more extensive duty to provide information to you. Your transparency does not replace that obligation. A request for your financial details is therefore no reason to accept incomplete information about the franchise system.

At the start of the selection process, ask for a written list of the information required. If a request is unclear, ask why the information is needed. This helps you distinguish between a reasonable assessment of your financial position and data collection without a clear purpose.

2. Distinguish between available funds and expectations

A figure in a financial summary means little unless it is clear when, and on what terms, you can access the money. Prepare a dated summary explaining the status of your funds.

For example, distinguish between:

• Readily available funds of your own: money you can actually put into the business.
• Funds yet to be released: for example, expected proceeds from a sale where the amount or payment date is still uncertain.
• Finance applied for: an application is not yet a commitment from a lender.
• Finance approved subject to conditions: state which conditions still need to be met.
• Existing commitments: loans or other outgoings that materially affect your available funds.

Also explain whether money from family is a gift, a loan or merely an intention to help. Otherwise, an informal promise could mistakenly be treated as immediately available start-up capital.

Suppose you expect part of your contribution to come from selling a property. Do not present that amount as readily available savings. Record that the sale has yet to take place and explain the uncertainties involved. The aim is not to present the most favourable picture possible, but to provide one that can be verified.

If necessary, ask your accountant or financial adviser to check that the summary is consistent with the supporting documents.

3. Share supporting documents selectively and securely

The statutory duty to provide information does not automatically mean that every document is needed in full. Ask what evidence will suffice for the purpose in question. Sometimes a bank balance confirmation or a focused summary can provide the same relevant information as a series of complete bank statements.

Financial documents may contain personal data. The General Data Protection Regulation (GDPR), known in the Netherlands as the AVG, also applies when such data is processed. Among other things, it requires a clear purpose, a lawful basis, appropriate security and the use of no more personal data than is necessary.

Before sending documents, agree on the practical arrangements:

• Who will receive the documents, and who may view them internally?
• Will they be shared with an external adviser or lender?
• Which secure channel will you use to transfer them?
• How long will the documents be kept?
• What will happen to them if you do not join the franchise?

Only redact irrelevant details if the necessary information can still be verified. Do not conceal commitments that matter to the assessment. If in doubt, first ask whether a more limited supporting document will be accepted. Nor should you automatically send your partner’s financial documents: ask for an explanation of why they are needed.

4. Record corrections and changes in writing

Keep a copy of everything you provide, together with the date and any explanatory notes. Record which figures are provisional and the assumptions behind your summary. This helps prevent disputes over what the franchisor knew and when.

If your financial position changes materially before signing, report this promptly. Examples include a rejected finance application, lower proceeds from a sale or a new payment obligation. Send an updated version and explicitly identify what has changed.

Read declarations in application forms critically, too. Do not confirm that finance is fully secured if conditions remain outstanding. Approval by the franchisor is also no guarantee that your investment is affordable or profitable; you still need to carry out your own due diligence.

Practical takeaway: prepare a single, up-to-date financial summary, substantiate relevant figures and agree on how supporting documents will be handled. Share enough for a fair assessment, but no more personal data than is needed for that purpose.