Master franchise agreements: The Franchise Act

As you may know, our firm is specialised in franchising. We work for both Dutch and international formulas, often with an origin in America, England or Asia.

For these international franchise chains a trend seems to be emerging whereby master franchise relationships are being entered into. In a master franchise relationship, the (master) franchisor grants the (master) franchisee the right to develop a certain territory, for example the Netherlands. The master franchisee then concludes franchise agreements with the franchisees in the granted territory. The master licence often includes an area development agreement. This agreement regulates how, where and when branches should be opened.

Many master franchisors wish to apply their own law to the master licence. This is nearly always impossible due to the Dutch Franchise Act, which prescribes compulsory application of Dutch law to all franchise agreements. And the scope of the concept of franchise agreements is broad, so that the master franchise agreement will also fall under it, as well as the area development agreement. And so in master franchising we will also have to deal with the waiting period, the PID, the rules concerning goodwill and participation, etc.

We have noticed that the Dutch law regularly meets with resistance from international franchisors. However, they too will have to face up to it and ensure that their (master) franchise agreements comply with the law. Many still have ground to cover. Please note that the law already applies to all new and extended (master) franchise agreements since 1 January 2021 and for the only three parts that still benefit from the transitional law, this will also be over at the end of this year.

We urge international chains to adjust their (master) franchise agreements as well! Of course the franchise team of Valegis Advocaten can help with this, please contact our franchise team via [email protected] or (06) 42162929.