Legal research within the franchise organization

Scrutinizing the legal foundation of the formula

Many franchise organizations have grown organically, with agreements and documentation that have developed over the years and have not always been maintained. Legislation changes, such as with the introduction of the Franchise Act and updated competition rules, and practice evolves. A periodic legal review reveals where the organization is vulnerable: outdated or non-compliant agreements, deficient pre-contractual processes, agreements that pose a risk under competition law, or insufficiently protected intellectual property. By mapping this out before things go wrong, risks can be managed before they lead to conflicts or claims.

Who do we work for?

We conduct legal research for franchisors and formula owners who wish to professionalize their organization or manage risks, for investors and private equity firms seeking to acquire a franchise organization and requiring due diligence, and for franchise organizations wishing to prepare for growth, internationalization, or a future sale. A legal review can also clarify the position in the event of an impending or ongoing collective dispute.

What are we investigating?

The franchise agreements

We assess the model agreements used and, where necessary, the individual deviations therefrom. Do the agreements comply with the Franchise Act? Are the goodwill and non-compete clauses valid? Is the right of consent correctly structured? Do the agreements contain void or voidable clauses? And are the agreements consistent with one another?

The pre-contractual processes

We investigate how the organization handles the pre-contractual duty of information and the standstill period. Is the required information provided in a timely and complete manner? Is the standstill period observed and documented? How are forecasts substantiated and provided? A flawed pre-contractual process is a major source of subsequent claims.

The sustainability under competition law

We assess formula agreements against the cartel prohibition and the Group Exemption for Vertical Agreements: price fixing, exclusive purchasing obligations, territory protection, and online restrictions. We identify risky or void clauses, with recommendations for adjustment.

Intellectual property and compliance

We assess whether the brand, trade name, and know-how are properly protected and licensed, and whether the organization complies with relevant compliance obligations, such as the GDPR regarding the processing of customer and franchisee data. We also take the consultation structure and the right of consent into account.

The result: insight and an improvement plan

The legal investigation culminates in a clear report containing the findings, ranked by risk severity, and a concrete improvement plan. We identify which risks are acute and require immediate attention, which can be addressed in the medium term, and which are manageable. This provides the organization with a workable overview and prioritization, rather than an unstructured list of legal remarks.

Our working method

We agree on the scope of the investigation with you in advance: a full review or a targeted audit of a specific component. We assess the documentation, conduct interviews with the organization where necessary, and report the findings with a prioritization and concrete recommendations. If desired, we subsequently guide the implementation of the improvement plan, from modernizing agreements to adjusting the pre-contractual process.

The legal assessment framework: the Franchise Act (Articles 7:911 to 7:922 of the Dutch Civil Code)

Since January 1, 2021, the Franchise Act has been in effect, which is included as Title 16 of Book 7 of the Dutch Civil Code (Articles 7:911 through 7:922 BW). These provisions are mandatory law: pursuant to Article 7:922 BW, it is not permitted to deviate from the law to the detriment of a franchisee established in the Netherlands. During a legal review, these articles form the primary assessment framework. We assess, among other things, whether the organization complies with the pre-contractual duty to provide information (Article 7:913 BW) and the four-week standstill period (Article 7:914 BW), the annual consultation obligation and transparency regarding financial contributions (Article 7:916 BW), the requirements regarding the right of consent for changes to the formula or a derivative formula (Article 7:921 BW), and the statutory provisions regarding goodwill and the non-compete clause (Article 7:920 BW). Pursuant to Article 7:920 paragraph 2 of the Dutch Civil Code, a non-compete clause after the termination of the agreement may not, among other things, last longer than one year and must be limited to the relevant field and the transferred know-how. We identify the points on which the existing documentation deviates from these mandatory standards.

Due diligence for the acquisition, investment, or sale of a franchise formula

A legal review is not only valuable for managing internal risks but also plays a central role in transactions. An investor or private equity firm seeking to acquire a franchise organization wants to know the viability of the agreements, whether the pre-contractual process holds up, and what potential claims are at risk. Conversely, a franchisor looking to sell their franchise formula increases marketability by putting its affairs in order beforehand. In both situations, we conduct targeted legal due diligence: we assess the portfolio of agreements, compliance with the Franchise Act, antitrust validity, and intellectual property protection, and we translate the findings into a risk profile useful in negotiations. Whether it concerns an international group acquiring a chain or a local franchise owner seeking to monetize their life's work, the investigation is tailored to the scale and importance of the transaction.

Lawyers and in-house counsel in one team

A legal review touches upon diverse areas of law: contract law, specialized franchise law, competition law, intellectual property, and privacy. At MKB Juristen, lawyers and in-house counsel collaborate in mixed teams to ensure the review is not only legally comprehensive but also practical and cost-effective. Where legal proceedings are imminent or a specialist legal opinion is required, we engage a lawyer; for broader investigative work and implementation, we deploy our (in-house) counsel. As a result, we serve both the international corporation with a chain of hundreds of branches and the baker on the corner working with a handful of franchisees. This review aligns closely with our broader expertise in Franchise Legal Advice , which includes reviewing franchise contracts , competition checks , and the protection of the intellectual property of the franchise formula .