Update Dutch Franchise Act: Franchise Act passed by the Upper House of Parliament
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On 30 June 2020, the Upper House of Parliament voted in favour of the new Franchise Act, meaning it has now passed the entire legislative process.
The Franchise Act provides rules to strengthen the position of franchisees and regulates aspects of all phases of the franchise relationship, i.e. prior to, during and after the franchise agreement. The act covers, inter alia, exchange of information, mutual consultation obligations, goodwill and non-compete clauses.
Impact for international practice: mandatory application in respect of Netherlands based franchisees
At the last minute at the Lower House stage, a major amendment was included in the draft act and this has also been accepted. As a result, the act now entails important and fundamental changes in international practice, as franchisees established in the Netherlands can invoke the protection of the act, regardless of the choice of law in the franchise agreement. Contract clauses contrary to the act will not be enforceable or may even be void.
However, franchise agreements subject to Dutch law as concluded with franchisees outside of the Netherlands, may deviate from the act.
Actions and timelines
Franchise agreements, both purely domestic as well as international should be reviewed and, where required, amended for compliance with this new legislation.
The act will come into force on 1 January 2021 and franchise agreements will have to comply from that date. In respect of franchise agreements concluded before 1 January 2021, the statutory provisions on goodwill, non-competition and interim changes to the franchise formula will enter into force on 1 January 2023.
Please see here for our previous update on the act.
