Franchising is a type of partnership between independent companies in which one party, known as ‘the franchisor’, allows the other party, ‘the franchisee’, to use certain commercial tools, products and services in return for the payment of a fee. These may include trade names, brand names, promotions, furnishings and retail formulae.
Although franchising is not regulated by law, a franchise agreement must conform to both EU and Dutch law. A franchise agreement must suit your own specific circumstances: if it is too vague, it could end up causing confusion. There are no standard franchise agreements.
A franchise agreement should last long enough to give the franchisee time to recoup its investments. The agreement should cover the following points:
- the retail formula and rights of use;
- the services supplied by the franchisor to the franchisee;
- the fee the franchisee is required to pay;
- the duration of the agreement;
- industrial and intellectual property rights;
- confidentiality and restraint of trade clause;
- termination of the agreement;
In many cases, manuals are produced containing the details of the franchise agreement. Also, the franchisor and franchisee often sign a preliminary agreement.
If you are interested in drafting a franchise agreement, or if you are a franchisor or franchisee and wish to be informed about your rights, please contact one of the members of our Company Law Practice Group. We will be pleased to help.