Franchising in Belgium
Economy
Despite being one of the smallest EU Member States, Belgium is
very trade-active, with approximately 75% of trade being with other
EU Member States. The Belgian GDP is EUR 344.2 billion (2008).
Legislation
Belgian enacted franchise specific legislation in February
2006. Belgian law does not define the concept of a “franchise”
but refers to ‘commercial partnerships’. In comparison to other
European countries Belgium takes a heavy handed and paternalistic
approach to regulating franchise agreements.
Franchise Market
The first franchise network in Belgium was established in 1930.
By 2006 statistics showed that there were in the region of 100
franchisors operating in Belgium.
Franchise Legislation
Belgium is a civil law country. Since 2006 Belgium has had
franchise specific legislation.
- The laws governing commercial partnerships provide for an
obligation of pre-contractual disclosure on the
franchisor. Disclosure must be made either in French or Flemish, at
least one (1) month before closing. The disclosure document must
consist of two sections which summarise the main terms of the
franchise agreement and enable the franchisee to evaluate the
prospects of the franchise. The franchisor must also disclose all
of its intellectual property rights. The franchisor must not ask
for any payment before the end of the one-month period. If the
franchisor fails to comply with these disclosure requirements, the
franchisee may, within a period of two (2) years post closing,
decide to have the agreement declared invalid.
- There are no franchise registration
requirements.
- Once an agreement has been entered into, the parties have a
general obligation to perform it in good faith.
- Both parties to a franchise agreement are placed under an
obligation of confidentiality as regards information obtained with
a view to entering into the agreement.
- Upon termination of a franchise agreement the Belgian courts
may in certain circumstances apply the laws relating to
distribution agreements, particularly when the object of the
franchise was product distribution. In this case the franchisor has
to give a reasonable notice before terminating the agreement, and
the franchisee-distributor may be entitled to an indemnity
payment.
Conclusion
In comparison to other European jurisdictions Belgian law
imposes one of the heaviest burdens upon franchisors, particularly
in relation to disclosure requirements. Before entering into a
franchise agreement, careful drafting of the documents is necessary
to comply with the stringent requirements of the Belgian law and
specialist advice should be taken to avoid the risk of the
agreement being held to be invalid due to insufficient disclosure,
and to consider the possible impact of distribution laws.
For more information please contact Graeme Payne.