Back to the drawing board: Belgian precontractual information requirements for franchise agreements undergo another amendment

Reference is made to franchising here, but the precontractual information obligations have a far-reaching scope of application. They also apply to any other commercial cooperation agreements in which one party grants another party the right to use a certain commercial formula (i.e. a common signboard, a common trade name, a transfer of know-how and/or commercial or technical assistance) in the sale of products or the provision of services.

1. Background

The precontractual information document (“PID”), a legal obligation under the Belgian Code of Economic Law (“BCEL”), provides critical contractual information which must be shared (together with a copy of the draft agreement) to the franchisee at least one month prior to entering into the agreement. During this one-month cooling off period, the franchisee may not engage in any undertaking whatsoever towards the franchisor, except for a confidentiality undertaking. Parties cannot waive this cooling-period in mutual consent; the franchisee can only waive this protection (subject to certain formalities) after the expiry of one month from the date of signature of the franchise agreement.

The PID is divided, in art. X.28 of the BCEL, into two sections. The first outlines vital contractual provisions such as consequences of non-compliance, fees, any competition clauses, the duration of the partnership, etc. The second part presents information relevant to correctly assess the partnership, including company information, the nature of activities, annual accounts, experience with commercial collaboration, market forecasts, etc.

A failure to adhere to this precontractual obligation could nullify the relevant clauses, or even the entire agreement, within two years of its conclusion (art. X.30 of the BCEL).

2. Revised information requirements since 1 September 2024

As from 1 September 2024, it is no longer necessary to include a description of the relevant contractual provisions under the broad umbrella of “obligations” (which often boiled down to the franchisor copy-pasting almost the entire franchise agreement), but the legislator has added the following information requirements to the PID:

• start-up or recurring costs such as marketing, IT, transport, and training costs at the franchisee’s expense and the conditions for the modification of these costs;
  
• obligations to respect maximum prices;
  
• minimum turnover and minimum purchase obligations and the consequences of non-compliance;
  
• limitations on the use of intellectual property rights;
  
• limitations on access to and rights to use customer data during and following the contract’s expiry;
  
• limitations on on-line sales and on-line promotions;
  
• clauses relating to the relationship and dependence between the commercial cooperation agreement and the lease or any other agreement regarding the point of sale;
  
• grounds for termination mentioned in the agreement and the financial consequences, in particular regarding costs and investments; and
  
• jurisdiction, choice of law, and procedural language clauses.

The purpose of replacing the broad reference to “obligations” by certain specific information, was to more effectively draw the franchisee’s attention to the most relevant aspects of the franchise relationship. The PID, originally created to provide a concise and clear overview of the essential contractual content and commercial context to the franchisee, was not fulfilling its intended purpose. In practice, the requirement to list all “obligations” led franchisors to copy-paste all provisions of the agreement verbatim, making it an overly extensive and complex document that obscured the essential aspects for the franchisee (cf. the Advice 2022/18 of the Arbitration Commission dated 10 June 2022).

3. Upcoming (extended) information requirements as from 1 March 2025

As from 1 March 2025, a new Royal Decree introduces substantial changes to the PID requirements. The Royal Decree supplements the PID with additional data points:

l) information about the expansion plans of the person granting the right that he is aware of at that time in the trading area;

This new information is required to ensure that the franchisor informs the franchisee about his expansion plans in the trading area. The franchisor is best aware of the history and condition of the relevant market where the franchisee will operate and should therefore have an idea of his own expansion plans in this area. Accordingly, he must inform the franchisee to allow him to make a realistic estimate of his operating account.

m) applications for an operating license or a location permit submitted to the competent authorities for fully or partially competing sales points in the trading area, if the regulations provide for this and insofar as this information is available;

The franchisor shall also inform the franchisee about the expansion plans of competing points of sale in the trading area. Because of the franchisor’s knowledge of the history and state of the market share of their network, he is expected to be aware of (or to inform himself about) the expansion plans of his competitors in the trading area. However, the legislator specified that if it is not possible to obtain such information from the competent authorities, including when the authorities have been asked for information but have refused to provide it or have not provided it, this cannot be considered a fault of the franchisor.

n) if it is customary in the network to which the agreement relates to make investments at regular intervals, the information about these investments, including an estimate of the amounts to be invested;

This provision is not very innovative; if applicable, the franchisor should provide the franchisee with information about investments that need to be made at regular intervals (including an estimate of the amounts). The franchisor was already compelled, under previous legislation, to include information regarding (start-up and recurring) investments to which the franchisee commits himself. This information requirement is now extended to all investments customary in the network.

o) an estimated operating account for a period of at least three years so that the person receiving the right can prepare his own operating account based on the model included as an appendix;

This is the most far-reaching new requirement. The franchisor is expected to possess valuable information derived from his activities or from his franchising agreements with others, and therefore also to share this information with the franchisee. According to an example given in the preparatory works, it is often necessary to carry out refurbishment works in the store every three to five years, but this is rarely mentioned in the franchising agreement. The required (standard) operating account should enable the franchisee to prepare his own operating account. It is however specified that the franchisor cannot be held to a result obligation for the success of the activity entrusted to his business partner, which may deviate from the principles of good management of their activity for which the franchisor is not responsible.

Finally, the Royal Decree clarifies the meaning of exclusive rights reserved for the franchisor (under Article X.28, §1, 1°, e), of the BCEL), referring to the sale of “identical or similar” goods or services under the same signboard or trade name in the franchisee’s trading area. This area was deliberately not defined as it varies depending on the activity performed. For example, a reference to “20 kilometers” could be meaningful for a large point of sale, but it makes no sense for a small point of sale located in a shopping center. Therefore, each franchisor should himself define the trading area specific to the activity entrusted to the franchisee.

The new requirements apply to new commercial partnership agreements entered into as from 1 March 2025, as well as to amendments and renewals of existing commercial partnership agreements occurring after the same date. Consequently, the PIDs issued before this date but relating to agreements which are signed as from 1 March 2025, must also meet these new requirements.