A four-week standstill before your first franchise agreement

You want to expand your existing business by taking on your first franchisee. The candidate is enthusiastic, premises become available and the opening date looks achievable. This is precisely when rushing can lead to ill-judged commitments. The statutory standstill period is not an administrative hurdle, but a protected period for due diligence. Managing it well lays a sound foundation for your franchise network.

1. Plan from the disclosure date, not the opening date

The Dutch Franchise Act, incorporated into Book 7 of the Dutch Civil Code, has applied in the Netherlands since 1 January 2021. Article 7:914 of the Civil Code provides for a period of at least four weeks between supplying the information specified in that article and entering into the franchise agreement. This is also known as the standstill period.

This is time before signing, not a right to cancel an agreement free of charge after it has been signed. Nor can you bring forward the signing of an agreement simply because it will not take effect until later.

Have someone check in advance that all the required information has actually been supplied. Sending a draft contract alone is not enough. This also includes annexes, financial obligations and relevant financial information. For an existing business becoming a franchisor for the first time, particular care is needed to distinguish between its own trading results and information about the proposed franchise outlet.

Then draw up a single timetable with three distinct milestones:

• the documented provision of the required information;
• the earliest possible signing date after the full period has elapsed;
• the operational launch, allowing enough time for all work to be completed after signing.

A target opening date does not shorten the statutory period.

2. Block payments and premature commitments

As a franchisor, you must not enter into the franchise agreement during the standstill period. This also applies to agreements that are inextricably linked to it. A confidentiality agreement is exempt.

You must also not induce the candidate to make payments or investments during this period that relate to the proposed franchise agreement. Asking for an advance payment towards the initial franchise fee is therefore not permissible. The same risk arises with mandatory purchases of equipment, fit-out items or a starter package.

The substance of the arrangement matters, not its label. A document headed ‘reservation’ or ‘letter of intent’ is not a safe workaround if it effectively already imposes franchise obligations or payment requirements.

Check not only your contracting process, but also how your staff and the suppliers involved operate. Make sure nobody automatically sends an invoice as soon as a candidate gives verbal agreement.

Have attractive premises become available? Do not pressure the candidate into signing an unconditional lease in advance. Ask a lawyer to assess what temporary or conditional arrangements are possible, who the parties would be and how those arrangements fit with the standstill requirements. A landlord has their own timetable; that does not change your statutory obligations.

3. Use the four weeks for independent due diligence

The standstill period does not mean that communication must stop. You can answer questions, clarify assumptions and explain how the working relationship will operate in practice. The candidate also has a statutory duty to investigate: within reasonable limits, they must take steps to ensure they can make a sufficiently informed decision.

Allow scope for due diligence without requiring the candidate to start putting the agreement into effect. A useful discussion agenda might include:

• reviewing cash flows and working capital with an independent accountant;
• having the candidate’s own lawyer assess rights, obligations and termination provisions;
• testing local assumptions, such as rent, staffing costs and the potential customer base;
• asking questions about the differences between your existing business and the new outlet.

Make clear which figures reflect historical results and which are assumptions or estimates. Answer questions in writing where the explanation is relevant to the decision.

Keep unanswered questions on an action list too. The passage of four weeks does not automatically make an unclear proposal ready to sign. A candidate who needs more time should not face an artificial deadline.

4. Treat changes as a fresh decision point

During the standstill period, you must not amend the draft franchise agreement unless the change benefits the prospective franchisee. Adding an obligation while keeping the original signing date is therefore not a routine negotiating step.

Compare every proposed amendment with the version already supplied. Record what is changing, why and what the financial or legal consequences are. If in doubt, have someone assess whether the change is genuinely beneficial. A lower fee combined with more onerous obligations is not necessarily an improvement.

Do the terms nevertheless need substantial revision? Do not push for a signature within the original timetable. Obtain legal advice on what information must be supplied again and when a new period should begin. Always use clear version numbers so that both parties are assessing the same proposal.

5. Give the go-ahead only after a final check

Appoint one person within your business to oversee the standstill period. Before signing, check the disclosure date, the final contract version, outstanding questions and any amendments made in the meantime. An acknowledgement of receipt helps provide evidence, but it does not remedy missing information.

Practical takeaway: block signatures, invoices and investment orders until the disclosure process and standstill period meet the legal requirements. That way, your franchise network starts with an informed choice rather than a fait accompli.