An information pack for your first franchisee

Turning your existing business into a franchise takes more than a good contract. A prospective franchisee needs to understand your franchise model, the obligations it involves and the evidence behind the information you provide. A carefully prepared information pack makes this clear. It is not a sales brochure, but a verifiable basis for working together within your franchise network.

1. Make information disclosure a standard process

In the Netherlands, the Dutch Franchise Act came into force on 1 January 2021. Its provisions are set out in Book 7 of the Dutch Civil Code. They require franchisors to provide information before entering into a franchise agreement. Prospective franchisees also have disclosure obligations and must carry out reasonable enquiries.

The law does not require a specific document called an ‘information pack’. However, a single, coherent pack is a practical way to share information fully, clearly and with a record of what has been provided. It prevents important explanations from becoming scattered across presentations, messages and individual conversations.

Appoint one person to manage the pack. When launching a franchise network, you may take on this role yourself, but have the financial and legal sections checked by suitably qualified advisers. Create a contents list showing, for each document:

• its title and subject;
• its date and version number;
• the person responsible for preparing it;
• the period or outlet to which the information relates;
• any limitations or outstanding questions.

Use the same core structure for every prospective franchisee. Add information specific to the candidate and outlet separately. This helps ensure that candidates do not receive materially different explanations without a clear reason.

2. Organise the pack around the candidate’s decisions

Do not start with whatever information you happen to have available. Start with what someone needs to assess the proposed relationship. A useful structure has four sections.

The proposed relationship. Include the draft franchise agreement and its appendices. Make clear which documents will form part of the contractual arrangements. When referring to an operations manual, identify a specific version and ensure that relevant obligations within it are not overlooked.

Costs and financial obligations. Bring together a breakdown and explanation of fees, mark-ups, contributions and required investments. Also state when payments fall due and what assumptions apply. A figure without an explanation of, for example, VAT, payment frequency or included services can easily be misunderstood.

Financial background. Provide information about your financial position as the franchisor. Also include the legally required financial data for the proposed location, or data from businesses you consider comparable. Explain why they are comparable. The results of your established business are not automatically representative of a new outlet.

How the franchise model works. Describe matters such as consultation arrangements, any competition from the franchisor, and access to and use of relevant turnover data. Include any other information that you know, or can reasonably be expected to suspect, is important to the decision to enter into the agreement.

This is a working structure, not an exhaustive legal checklist. Have the pack reviewed to confirm that it meets the statutory disclosure requirements for your franchise model and proposed relationship.

3. Separate facts, assumptions and expectations

Particularly when recruiting your first franchisee, there is a risk of presenting your own experience as proven performance of the franchise model. Make clear whether each financial statement or overview contains actual results, a budget or a scenario.

Suppose your existing outlet attracts many customers because you have been personally known in the area for years. State this when using that outlet as a comparison. Favourable rent, family members working in the business or a one-off large order can also affect comparability.

For projections, record:

• the data used as the starting point;
• the adjustments made for the new outlet;
• the uncertainties that remain;
• who prepared the calculation and when.

The Dutch Franchise Act does not impose a general obligation to provide a turnover forecast. This does not remove the obligation to share relevant financial information. If you choose to provide a forecast, make sure it has a sound basis. A standard disclaimer stating that results are not guaranteed does not remedy a misleading presentation.

Do you lack experience of independently operated franchise outlets? Say so explicitly. Being transparent about what has not yet been proven helps the candidate assess the risks realistically.

4. Keep a record of delivery, questions and changes

Provide the pack through a clearly organised, secure platform or as a clearly identifiable set of documents. Keep a record of which version was made available on which date. Ask for acknowledgement of receipt, but do not present this as a declaration that the candidate understands everything or waives any rights.

Also keep a log of questions. Answer material questions in writing and add the responses to the pack. Make corrections to inaccurate information visible: do not simply replace a file without explanation.

The legally required information must be provided at least four weeks before the franchise agreement is entered into. During this standstill period, restrictions apply to matters including entering into contracts, making detrimental changes and requiring payments or investments. If information is added or changed, seek advice on the implications for disclosure obligations and timing; do not automatically assume that the original disclosure date remains sufficient.

Practical conclusion: before your first contract discussion, prepare a single information pack with a contents list, substantiated data and version control. This makes disclosure a repeatable process and helps build trust within your franchise network.