Non-compete clause in franchise

The non-compete clause in the franchise

A non-solicitation clause prevents the franchisee from approaching or serving customers, suppliers, or other business relations of the franchise after the termination of the franchise agreement. It is a variant of the non-compete clause, but specifically aimed at protecting the client base rather than prohibiting competing activities in general. Additionally, the anti-poaching clause is common in franchises, which prohibits the franchisee from approaching or employing personnel of the franchise or of other franchisees. Both clauses affect the franchisee's freedom of movement after the end of the partnership.

Who do we work for?

We assist franchisors who wish to protect their client base and staff with a valid and sustainable clause, and franchisees who want to know whether the non-solicitation or anti-poaching clause to which they appear to be bound is legally valid and does not unnecessarily restrict their scope after termination. Additionally, we advise on disputes regarding the interpretation, validity, and enforcement of these clauses.

The non-compete clause under the Franchise Act

The Franchise Act addresses non-compete clauses in Article 7:920, paragraph 2 of the Dutch Civil Code and imposes strict cumulative conditions on them. In practice, a non-solicitation clause that takes effect after the termination of the agreement is generally assessed under the same regime, because it restricts the franchisee's competing activities. This means that a non-solicitation clause must also be agreed upon in writing, must be indispensable to protect know-how, must be limited to competing goods or services, may not extend geographically beyond the operating area, and may be valid for a maximum of one year. A non-solicitation clause that exceeds these limits runs the risk of being void.

The non-solicitation clause

The non-solicitation clause, aimed at prohibiting the approach or employment of personnel, occupies a somewhat different legal position compared to non-solicitation and non-compete clauses. It restricts not so much the franchisee's competing activities as it does their recruitment of personnel. In principle, a non-solicitation clause can be formulated more broadly than a non-compete clause, but it must not be unreasonably burdensome and must serve a legitimate interest. In practice, a non-solicitation clause is usually limited in duration and scope, for example, to personnel with whom an employment relationship existed during a certain period prior to the termination.

The relationship to the non-compete clause

The relationship clause, the anti-solicitation clause, and the non-compete clause are often included in conjunction, but they serve different interests and have different limits. A franchisor wishing to include all three must carefully align them so that they reinforce each other rather than overlap or conflict. It is important for the franchisee to recognize exactly which clause restricts them and whether that clause is valid, as the consequences for their future business differ per clause.

Nullity, enforcement and disputes

As with a non-compete clause, a non-solicitation clause that exceeds statutory limits runs the risk of being void, after which the franchisor cannot rely on it. A valid clause can be enforced by means of a formal notice and, if necessary, summary proceedings with a claim for an injunction and a penalty payment. If the franchisee believes that a clause is void or disproportionately restricts him, he may challenge its validity. The outcome depends heavily on the wording and the facts.

Our working method

For franchisors, we draft non-solicitation and anti-poaching clauses that protect relevant interests and remain within legal limits, or we assess the validity of existing clauses. For franchisees, we assess whether the clauses to which they appear to be bound are legally valid and what scope they have. In the event of a dispute, we determine the most effective course of action, taking into account the speed often required for enforcement or defense.

Does the non-compete clause fall under the Franchise Act? Recent case law

For a long time, it was uncertain whether a non-solicitation clause actually falls under the regime of Article 7:920 paragraph 2 of the Dutch Civil Code. The wording of the law refers to a clause that restricts the franchisee's ability to operate in a specific manner after the termination of the agreement, and literally focuses on restricting competing activities, whereas a non-solicitation clause concerns the relationships with whom the franchisee may do business. The geographical requirement—a clause may not extend beyond the operating area—is also difficult to apply to a non-solicitation clause, because relationships may also originate from outside that area. For this reason, it was argued for a long time that the Franchise Act might not apply to a non-solicitation clause.

Case law now provides a clearer direction. The Amsterdam District Court ruled in summary proceedings on 12 November 2025 (ECLI:NL:RBAMS:2025:8931) that a non-solicitation clause must indeed be regarded as a clause restricting the franchisee as referred to in Article 7:920 paragraph 2 of the Dutch Civil Code. Because the franchisor had not demonstrated that the non-solicitation clause was indispensable to protect the transferred know-how, not all cumulative conditions were met, and the judge provisionally deemed the clause invalid; its effect was suspended. For both franchisor and franchisee, this means that a non-solicitation clause must be carefully drafted and substantiated within the limits of the Franchise Act. Our lawyers and in-house counsel closely follow this legal development and assess your clause against the most recent state of case law.

Penalty clause and mitigation for violation

A penalty clause (Article 6:91 of the Dutch Civil Code) is often linked to a non-solicitation or non-poaching clause, so that in the event of a breach, the actual damage does not need to be proven, but a fixed amount or a daily amount is immediately due. Pursuant to Article 6:92 of the Dutch Civil Code, the penalty generally takes the place of compensation for damages, unless the parties have agreed otherwise. A well-formulated penalty clause makes enforcement considerably easier and has a preventive effect.

The offender may request the court to mitigate the penalty pursuant to Article 6:94 of the Dutch Civil Code. However, the court may only mitigate a penalty if the application of the clause would lead to an excessive and therefore unacceptable result. In doing so, the court weighs, among other things, the relationship between the actual damage and the stipulated penalty, the nature of the agreement, and the content and purport of the clause. A mere appeal to an unfavorable financial situation is generally insufficient. We draft penalty clauses that are proportionate and enforceable, and conduct the debate regarding liability or mitigation in disputes — for the international group just as much as for the baker on the corner.

Cohesion with other franchise expertise

The non-solicitation clause rarely stands alone. It is closely linked to the non-compete clause and the broader agreements in the franchise agreement. A comprehensive arrangement requires coordination between these clauses and the other components of your franchise system. You can find a complete overview of our services on the Franchise Legal Advice, where our lawyers and (corporate) legal counsel assist franchisors and franchisees, ranging from international corporations to independent entrepreneurs.