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The Netherlands: Europe’s newly-regulated franchising hub

The Netherlands: Europe’s newly-regulated franchising hub

Dutch franchising has proven resilient for decades, but a brand-new franchising law needs to be considered before expansion

The Dutch franchise industry is one of the largest in Europe, and both domestic and international brands have found success among its consumers for a number of years.

The latest figures to come from the Dutch Franchise Association indicate that 903 franchises operate in the country, and in 2020, these generated upward of €37.8bn across 33,566 locations. In total, the Netherlands’ franchise industry employs more than 375,000 people – around two per cent of the country’s total population.

“The Netherlands has an attractive business climate for international organizations,” says Charlotte Oude Reimer, director of the Dutch Franchise Association. “We have a very diverse population, and the location between Germany, Belgium, and the North Sea is ideal for reaching every part of Europe.”

“The Netherlands has an attractive business climate for international organizations”

Dutch consumers are also very familiar with international brands thanks to the country’s reliance on foreign trade, and 90 per cent of the population speak English, with many being multilingual in addition. Put simply: don’t let the language barrier put you off, because if your concept is worth consideration, then odds are it has the potential for success in this thriving European gem.

The new Dutch Franchise Act

But before you pack your bags and head to the Netherlands, be mindful of recent regulatory changes in the country which affect all franchisors.

On June 16, 2020, the Dutch parliament voted in favor of a proposed new franchising law that came into effect on January 1, 2021. Referred to as the Dutch Franchise Act, this marked the first occasion in Dutch history that franchising was governed by a specific set of laws. Prior to this, many franchise disputes were governed under general Dutch contract law.

“The franchise law became effective for new franchise contracts in January 2021 and has a transition period of two years for current contracts,” explains Reimer. “The law is mandatory and affects pre-contractual information provision, information exchange on changes during the contract period and post contractual agreements. It is important that all franchisors and franchisees are aware of the franchise law and that they agree with each other on the changes that the law entails.”

One of the key things that the Dutch Franchise Law introduced was the legal definition of a franchise: “an agreement whereby, in exchange for a fee, the franchisor provides the franchisee the right and obligation to exploit a franchise formula in a designated manner for the production or sales of goods or the performance of services.” This shouldn’t contain any surprises for established franchising professionals, but the legal definition’s sheer existence is an important factor that differentiates the Netherlands from other European markets that remain largely unregulated.

As well as providing this definition, the Dutch Franchise Act stipulates that franchisors must provide franchisees with a disclosure document at least four weeks prior to the date that the agreement will be concluded. It also requires that the franchisor must inform franchisees of any intended amendments to the franchise agreement, as well as any information that is important to the franchisee when carrying out the agreement.

A lot of these requirements will be familiar to international franchisors, but are commonly seen as good faith requirements elsewhere in Europe. Part of the reasoning behind the Dutch parliament introducing the Dutch Franchise Act was because franchising as a model was seen as highly valuable to the Dutch economy, but franchisors were previously viewed as much more dominant in the agreement than franchisees. The new act seeks to rebalance that dynamic, and moves the Netherlands from a completely unregulated franchising market to arguably one of the most regulated countries in the world for franchisors

Bouncing back from a pandemic

Each and every country’s economy around the world was impacted in some way by the coronavirus pandemic, and this is no different for the Netherlands. However, while the Dutch undoubtedly took a hit in 2020, it seems that the resilience of the franchise model has protected its entrepreneurs from suffering the worst outcomes.

“The Dutch franchise sector has of course been affected by the COVID pandemic. Several branches in the Netherlands, such as fitness, hairdressing, clothing and shoe stores, and restaurants were forced to close for a longer period of time. Other franchise organizations, on the other hand, had higher sales, such as supermarkets and DIY stores,” says Reimer.

The numbers certainly back up this confidence. The Dutch franchise industry’s turnover fell by around €400m between 2019 and 2020, but the number of franchisors declined by just 14 brands.

“Overall, the franchise sector has remained stable, but specifically for this year there is a lot of difference between the branches. We do expect that, as previous crises have shown, franchisees will recover faster if the economy picks up again. The franchisee goes the extra mile to make his business a success.”

Key event: The Dutch National Franchise Expo

Taking place just 45 minutes from Amsterdam, the Dutch National Franchise Expo is set to bring together franchisors from all over Europe for a two-day showcase of what makes this country special.

What: The Dutch National Franchise Expo

When: September 23 - 24, 2021

Where: Hart Van Holland, Nijkerk

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