Legal masterclass: is your legal package in order?

The Franchise Act has been in effect since January 1, 2021. The Franchise Act includes a transitional period of two years for some components. These are the provisions concerning the non-compete clause, the right of consent, and the valuation. All other regulations of the Franchise Act have been in force since January 1, 2021. The Franchise Act has made it even more important to have your legal documents in order. Through our Legal Masterclass, we are happy to help you get started.

Different types of agreements

Non-disclosure agreement

Through non-disclosure agreement (NDA), the franchisor and (prospective) franchisee set forth the terms for exchanging and/or providing confidential information.

What is established in a non-disclosure agreement?

• For what purpose is the confidential information provided by the franchisor?
• What information is considered confidential?
• What can and cannot the (prospective) franchisee do with this information?
• When is information considered confidential?
• By signing a confidentiality agreement, the (prospective) franchisee is not obligated to enter into other agreements.
• Etc.

Pre-contractual Information Document

The goal of the Franchise Act is to strengthen the position of the franchisee. Thus, the Franchise Act includes an article regarding the information that a franchisee must receive before joining a franchise formula:

1. The franchise agreement to be signed, including attachments.
2. An overview of all fees, surcharges, and other contributions to be paid, including explanations of their purposes.
3. An overview of the investments the new franchisee will have to make.
4. Information about the manner and frequency of franchise meetings.
5. Contact information for the representative body of the franchisees (if present).
6. Information about the financial health of the franchisor.
7. Financial information about the intended location where the new franchisee will operate, or information from comparable franchise locations.
8. All other potentially relevant information for the prospective franchisee.

This information is intended to help the franchisee make an informed decision on whether to join the franchise formula. To streamline this, we advise including it in a Pre-contractual Information Document.

Processor agreement

The General Data Protection Regulation (GDPR) has been in effect since May 25, 2018, and remains highly relevant within franchising. This regulation exists to protect personal data. It is important to make agreements about this with all franchisees. In the franchise agreement or in a separate processor agreement, it must be established who is responsible and who is the processor. This must be recorded because it can contribute to the value of both the franchisor's and franchisee's businesses. Additionally, penalties can be imposed if the GDPR is not properly managed within your organization.

Franchise agreement

The most well-known agreement in franchising. The franchise agreement is a legally binding contract. It describes the terms of the franchise relationship that both the franchisor and franchisee have agreed upon. Once a franchise agreement is developed, it is important to keep these contracts updated as new laws and regulations emerge. Consider, for example, the Franchise Act, the group exemption regulation for vertical agreements, and the GDPR.

Privacy statement

Under the General Data Protection Regulation (GDPR), you have a duty to inform. This means you are required to clearly inform new and existing customers about what you do with their personal data and why. In practice, an online privacy statement is the most convenient way to comply with this requirement. Often, a privacy statement needs to be adjusted based on the processor agreement.

Subleasing franchise

Subleasing in franchising occurs when you rent a space from a third party and subsequently sublease this space to your franchisee. If you choose to be the primary leaseholder of a location, there are certain matters you must arrange. For example, creating a link between the franchise agreement and the lease agreement. This must then be approved by the subdistrict court.

General Terms and Conditions

We recommend developing General Terms and Conditions for your franchisees. If a franchisee delivers products and/or services, it is advisable to record everything concerning their sale and delivery in the general terms and conditions. In the General Terms and Conditions, agreements are recorded between the franchisee and the customer. Topics covered include the payment method, how a product or service is delivered and within what timeframe, the conditions a product or service must meet, whether a warranty is included, and how complaint handling is arranged.

Service Level Agreement

In an SLA (also known as a Service Level Agreement), the quality of the services provided is described. You can use this if, for example, you have developed a CRM system for the franchise organization. Through a Service Level Agreement, a franchisee knows what to expect from the services they purchase, and the franchisor can be held accountable if they do not deliver the agreed-upon quality. In short, everyone knows what to expect.

Personalizing legal documents

The legal documents are always a template that needs to be personalized for each franchisee. Therefore, it is important to always read through each document again to check whether what is described applies to the new franchisee. If there are deviations, an addendum must be developed. It is also important that the naming is correct, that the dates correspond with the lease agreement (if applicable), and that the signatory authority is filled in. Koelewijn & Partners has years of experience in this and does this a lot for our clients.

Legal masterclass, become a master in franchise!

The foundation of a successful franchise organization is based on good and quality legal documents. Are these present and up to date? We would love to assist you in the (further) development through our Legal Masterclass. Interested in our Masterclass or in tailoring the legal documents? Please contact us via the form below.