Article Franchise+ – “Obligations and rights of the starting franchisee” – mr. AW Dolphijn – dd
What should you pay attention to as a starting franchisee, what are your obligations and what are your rights when concluding the franchise agreement? Here is a legal consideration of the main points of the obligations and rights:
Obligations of the Proposed Franchisee
Prior to concluding the franchise agreement, the franchisor must be provided with timely information about the financial position of the franchisee. The franchisor must be given the opportunity to test whether the necessary investments (at the start and during the term of the franchise agreement) can be financed by the intended franchisee.
The prospective franchisee should further investigate the information received from the franchisor. Are you sure you understand all the rules in the franchise agreement? Important questions can be, for example, whether the franchisee can switch to a competitor after the end of the agreement or can continue under its own name. The Franchise Act stipulates that the intended franchisee is obliged to carry out an investigation or to have it carried out.
It is advisable for the intended franchisee to properly record which research has been carried out to demonstrate that the (legal) obligations have been met. Therefore, make sure that it is recorded when which information is shared with the franchisor and ensure that the necessary expertise is involved in understanding the franchise agreement submitted.
Rights of the Intended Franchisee
The intended franchisee is entitled to receive all information from the franchisor that may be relevant to the conclusion of the franchise agreement. This also concerns, for example, the financial data about the intended location or financial data of comparable locations. The point is that if the franchisor has information that could help the prospective franchisee in making the business case, the prospective franchisee is entitled to that information.
After the franchisor has provided all relevant information, the intended franchisee is entitled to a reflection period of at least four weeks. Within this period, the franchisee must have the opportunity to fulfill its investigation obligations, as described above. The franchise agreement may not be changed to the detriment of the franchisee during the cooling-off period. The franchisee can therefore use the time to clear up any ambiguities, but also to negotiate with the franchisor. After all, deviations from the franchise agreement in favor of the intended franchisee are possible during the cooling-off period.
It is advisable for the prospective franchisee to record all questions to the franchisor. Recording the answers is also important. A critical attitude is desired, so don’t hesitate to ask questions.
mr. AW Dolphijn – franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl
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