A franchise contract is an agreement whereby the franchisor supplies know-how, a brand, and an operational formula to a franchisee in exchange for remuneration. International franchising offers rapid growth without heavy investments. In our practice, we assist Dutch franchisees with expansion into the EU and beyond. Local franchise laws, competition law, and franchisee protection vary significantly by country. A well-considered legal framework prevents damage claims and network paralysis.
What is the legal problem?
Franchising combines brand licensing, know-how transfer, operational guidelines, and commercial cooperation. Internationally, rules regarding pre-contractual disclosure, franchisee protection, termination, and goodwill vary. Competition law limits exclusivity and price agreements. Incorrect choices lead to void clauses, damage claims, and stagnation of the network.
What does the law say?
In the Netherlands, the Franchise Act applies (Articles 7:911-7:922 of the Dutch Civil Code, since January 1, 2021), with mandatory prior information (Article 7:913 of the Dutch Civil Code), franchisee consent rights (Article 7:921 of the Dutch Civil Code), and a goodwill arrangement. Regulation (EU) 2022/720 (vertical agreements) governs exclusivity and non-compete in franchising. France has the Loi Doubin (Article L330-3 of the Code de commerce); the US has the FTC Franchise Rule.
For trademarks in franchising, the EU Trademark Regulation (2017/1001) and the Madrid Protocol apply for international registration. Goodwill payments upon termination are applied in some countries analogously to commercial agency.
What risks do companies face?
Non-compliance with disclosure obligations leads to the voidability of the contract under Article 7:917 of the Dutch Civil Code. Overly broad non-competition clauses are moderated. Awkward royalty structures affect Article 101 TFEU. Upon termination, claims for investments made and goodwill threaten, especially in countries with strong franchisee protection. Loss of trademark rights in jurisdictions without timely registration undermines the entire franchise concept.
Practical example from our practice
We represented a Dutch retailer that granted a master franchise for Italy to a local partner. The partner did not register the trademark, while the contract assumed this. A local competitor secured the trademark and blocked further expansion. Upon contract renewal, we incorporated the following: trademark registration by the franchisor themselves via the Madrid Protocol before each new market, a contractual obligation to report infringement, and an exclusive right to litigate. Success was achieved within four months of the next infringement.
What can you do?
Register trademarks yourself in all relevant countries via the Madrid Protocol before you franchise. Strictly follow disclosure and registration requirements (Article 7:913 of the Dutch Civil Code). Align royalties, fees, and marketing contributions with the market and Regulation 2022/720. Arrange for know-how protection and exit. Incorporate masters only where strategically and legally appropriate. See also our article on International Licensing Agreements.