Franchising in the Netherlands
Economy
The Netherlands is known for its stable economy which relies
heavily on foreign trade. The Dutch GDP is EUR 594.6 billion
(2008).
Legislation
There is no franchise specific legislation in the Netherlands,
therefore a franchise agreement, like any other commercial
agreement, falls under the provisions of the Dutch Civil Code.
Franchise Market
Most recent statistics show approximately 450 franchisors
operating in the Netherlands. There is a mix of both established
international franchisors including McDonald’s, Subway and most of
the leading hotel brands as well as domestic brands such as Albert
Heijn and Coffee Company BV.
Franchise Legislation
The Netherlands is a civil law country. There is no franchise
specific legislation in the Netherlands. Franchise agreements are
regulated under the Dutch Civil Code.
- The statutory duty of good faith (or reasonableness and
fairness) imposes an obligation of pre-contractual
disclosure on the franchisor. The franchisee is entitled
to assume that the information provided is correct and is entitled
to rely on it. The duty of good faith applies also to the
construction and performance of an agreement, and an agreement may
be set aside in limited circumstances.
- There are no franchise registration
requirements.
- A franchisor who unreasonably breaks off negotiations may be
held liable in damages to the franchisee, or ordered to resume
negotiations.
- Under certain circumstances franchisees may be treated as the
franchisor’s employees for the purposes of taxation and employment
law, in which case they will enjoy greater protection and the
franchisor will be liable for their tax and national insurance
contributions. This will happen when the franchisee performs the
work personally and there is a supervisory relationship between the
franchisor and the franchisee. This view is taken more readily by
the tax authorities than by the courts.
Conclusion
The Netherlands is a relatively franchise-friendly country, with
no undue burdens and requirements imposed by law. Franchisors
will however need to carefully consider the negotiation procedure,
in particular should they wish to end negotiations prior to closing
and the potential tax and employment consequences where the
performance by the franchisee of its obligations is closely
supervised by the franchisor.
For more information please contact Graeme Payne.