A franchise agreement is not simply signed. In Belgium, a statutory information duty applies in advance so that the prospective franchisee has sufficient time and information to assess the collaboration correctly.
At least one month in advance
The franchisor must provide a draft of the agreement and a separate pre-contractual information document at least one month before signature. During that period, the prospective franchisee may in principle not yet enter into a definitive commitment or make payments connected with the franchise. That period is intended as a genuine cooling-off period, not as an administrative formality.
What information must be disclosed?
The prospective franchisee must obtain a clear picture of the principal commercial and legal consequences of the collaboration. This includes among other things financial obligations, such as costs associated with the collaboration, and fees, including direct and any indirect fees.
Also non-compete clauses must be clearly explained. Not only their existence is important, but also their duration, scope and consequences. In addition, the necessary investments must be sufficiently transparent. Think, for example, of costs for fit-out, IT, training, marketing or other expenditure required to operate the franchise.
The economic context also counts
The information document does not contain contractual provisions alone. The prospective franchisee must also receive relevant socio-economic information with which to assess the formula and the commercial risk. That is important, because a franchise agreement can be formulated in a legally correct manner and yet weigh heavily from an economic point of view.
Confidentiality can be agreed
Because sensitive information is often shared at this stage, an NDA may be used. In this way the franchisor can, for example, protect know-how or commercial information while the prospective franchisee examines the file. An NDA does not, however, alter the statutory information duty.
What in the event of non-compliance?
The consequences can be considerable. In certain cases the franchisee may invoke the nullity of the agreement, for example where the mandatory documents were not provided in time or the statutory period was not respected. Where certain essential information is missing, the nullity of specific contractual clauses may also arise.
