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BELGIUM ADOPTS FRANCHISE LAW

by Steven B. Feirman and Philip F. Zeidman
 

The Belgian Parliament recently enacted a franchise law requiring franchisors to give a pre-sale disclosure document to prospective franchisees. Belgium becomes the latest country to join the disclosure club, following China’s adoption of a disclosure requirement within the past year.


New Law Is Extremely Broad

The scope of the new law is extremely broad. It applies to all “commercial partnership agreements,” which are defined as “agreements made between two persons, each of whom acts in its own name and on its own account, by which one of the persons grants to the other, in consideration for remuneration of any nature whatsoever, whether direct or indirect, the right to use in the selling of products or the provision of the services, a commercial formula falling within one or more of the following forms”:

  • a common sign or brand;
  • a common commercial name;
  • a transfer of know-how; or
  • commercial or technical assistance.


May Cover Arrangements Not Commonly Regarded as Franchises

In light of this definition, it may well be that many license agreements, distribution agreements, and similar arrangements that are not commonly thought to be franchise agreements will be subject to the new law.


Pre-Sale Disclosure Requirements

If the law is applicable, the franchisor must provide a disclosure document to the prospective franchisee at least 30 days before any agreements are signed or any payment is made. The disclosure document must be organized into two sections. The first section must summarize the main provisions of the franchise agreement, such as the method of calculating royalties, the consequences of the franchisee’s failure to comply with its obligations, conditions of renewal, reservation of rights by the franchisor, non-competition restrictions, and the particulars of the franchisor’s right of first refusal (if any).

The second section must provide extensive detail that “evaluates” the franchise agreement. This requires disclosure of the following information, among other items:

  • The history, state, and “perspectives of the market,” including market share information, from both a local and general point of view;
  • The history and experience of the franchise system;
  • The intellectual property rights being granted, including the prior commercial experience relating to the intellectual property;
  • Three years of data about the number of units in Belgium and elsewhere, and three years of data about units opened, terminated, and not renewed; and
  • Perspectives on the expansion of the system.

Failure to comply with the law may result in the entire agreement, or certain provisions of the agreement, being unenforceable.

 
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Steven B. Feirman is a past partner with DLA Piper and concentrated his practice in domestic and international franchise and distribution law, as well as antitrust and trade regulation matters.

 
 
 

Philip F. Zeidman is a senior partner with DLA Piper's Franchise and Distribution practice, based in Washington, DC. He devotes his practice to domestic franchising law and the rapidly growing field of international distribution, licensing and franchising law. He was recently named Global Franchise Lawyer of the Year at the Who's Who Legal Awards for the fifth consecutive year, by Who’s Who Legal, The International Who’s Who of Business Lawyers. Chambers USA: America's Leading Lawyers for Business ranks him among the foremost practitioners of franchising law. In 2008 it noted that he is "considered an icon of the franchise industry" and has a reputation "second to none," and in 2009 it described him as "the godfather of international franchising."

Email: philip.zeidman@dlapiper.com

 

DLA Piper
With 3,500 lawyers in more than 65 offices in Asia, Europe, the Middle East and the United States, DLA Piper is positioned to help companies with all their legal needs anywhere in the world.

Internet: www.dlapiper.com

 
 
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