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Since 2021, the Franchise Act has imposed requirements on franchise agreements, including existing contracts. The transitional period for elements such as the goodwill arrangement, the right of consent, and the non-compete clause has expired. If your franchise agreement does not yet comply, it is high time to amend it.
What does the Franchise Act regulate?
The Franchise Act strengthens the position of the franchisee. Whereas there was previously a great deal of freedom, mandatory requirements now apply: a pre-contractual duty to provide information with a cooling-off period, a right of consent regarding significant changes, a goodwill arrangement, and strict limits on the non-compete clause after termination.
Existing contracts must also comply
The law applies not only to new franchise agreements but also to existing contracts. For a number of components — goodwill, right of consent, and non-competition — a transitional period applied to amend existing agreements. That period has now expired.
Time for action
If your franchise agreement has not yet been adapted to the law, you no longer comply with those points. Provisions that conflict with the Franchise Act will not hold up, and you run the risk of disputes and legal problems. Therefore, review your contract as soon as possible and amend it where necessary.
For both franchisor and franchisee
If you are a franchisor, you want your agreements to be correct and to protect your formula. If you are a franchisee, you want to utilize the protection the law offers you. In both cases, a legal review and, where necessary, an adjustment of the contract pays off.
Frequently Asked Questions
Does the Franchise Act also apply to my existing contract?
Yes. Existing franchise agreements must also comply with the law; the transitional period for elements such as goodwill and non-competition has expired.
What if my contract has not been amended?
In that case, you do not comply on those points, and conflicting provisions will not hold up. You risk disputes and legal problems.
What should I do now?
Have your franchise agreement reviewed and, where necessary, adjusted to comply with the Franchise Act.
Make your franchise agreement Franchise Act-compliant?
Our legal experts review and update your franchise agreement. View our franchiseteam or schedule a free consultation.
