Ending your franchise early: when is it allowed and what are the financial consequences?

Contract Law

14 October 2026

Ending your franchise early: when is it allowed and what are the financial consequences?

Stelt u zich eens voor: u werkt al jaren met dezelfde zelfstandige. Hij stuurt facturen, factureert btw en heeft een eigen kvk-nummer. Toch krijgt u in 2026 ineens vragen van de Belastingdienst over de aard van uw samenwerking. Hoe heeft het zo ver kunnen komen?

A franchise outlet does not always perform as expected. Perhaps the income is disappointing, the workload turns out to be higher than expected, or as an entrepreneur you get less satisfaction from your business than you had hoped. You may then want to end the franchise early. But what if your franchise agreement still has years to run? Can you simply stop, or are you obliged to continue the business? And what are the financial consequences of early termination? Two recent court rulings shed light on these questions.

You cannot simply stop

As an entrepreneur, you are in principle free to decide to close your business. Practice shows, however, that this may be different with franchise agreements. Closing your franchise business does not automatically mean that you are also released from your franchise agreement. In principle, you remain bound by the arrangements in your contract.

Many franchise agreements contain an operating obligation. This commits you, towards your franchisor, to actually operate the franchise outlet in accordance with the agreed terms for the duration of the agreement. You therefore cannot simply discontinue operations, in whole or in part, on your own initiative.

If you do so anyway without a contractual or legal basis, this may constitute a failure to perform the franchise agreement. The franchisor can hold you liable for this and may claim damages and contractual penalties.

Disappointing results are not enough

This issue arose in a recent case (ECLI:NL:RBLIM:2026:9708). The franchisee wanted to stop the franchise after about a year. The business no longer gave much job satisfaction and the net profit amounted to only €5,052.50. The franchisee argued that the business was loss-making and that continuing was not feasible, because she could no longer meet her payment obligations. The franchisor disputed this and went to court to enforce continued operation.

The court’s starting point was that disappointing business results were in principle at the franchisee’s expense and risk. This is in line with the principle that a franchisee operates the business for its own account and risk. However, this does not mean that an operating obligation can be enforced without limits under all circumstances. If continuation demonstrably leads to substantial losses, the franchisee’s interest in termination may carry more weight.

That was not the case here. The franchisee had not substantiated the alleged losses and payment problems with financial documents. On the contrary, the documents submitted by the franchisor showed that the business was achieving a positive result. That result was modest, but still positive. The court therefore decided that the franchisee had to continue the business, subject to a penalty of €1,000 per day.

Damages for unauthorised termination

What are the consequences if you, as a franchisee, stop operating the business without being entitled to do so? That question was central to a recent case before the District Court of Midden-Nederland (ECLI:NL:RBMNE:2026:6444).

This case concerned a driving school franchise in which the franchisee stopped giving driving lessons early, even though this was not permitted under the franchise agreement. The franchisor dissolved the franchise agreement and claimed €86,950 in missed franchise fees and €60,000 in contractual penalties for failing to return teaching materials on time after termination.

The court ultimately awarded €36,900 in damages. Several factors played a role:

Not all missed franchise fees are damage. The franchisor had not sufficiently substantiated that it was entitled to the missed fees for the entire remaining contract period.
Costs saved must be deducted. As a result of the termination, the franchisor saved €14,000 in costs. This amount was deducted from the damages.
A replacement franchisee limits the damage. The franchisor had appointed a new franchisee in the same area as of 1 September 2026. The damages for missed franchise fees were therefore only awarded up to that date.
Costs of finding a replacement may be eligible for compensation. The €6,500 in costs for recruiting and onboarding the replacement franchisee was awarded.

The franchisor also did not receive the contractual penalties it had claimed for the late return of the teaching materials. The court ruled that, in these circumstances, invoking the penalty clause was unacceptable according to standards of reasonableness and fairness. The franchisor had not substantiated what specific disadvantage it had suffered as a result of the late return, and moreover, the franchisee had already stopped giving driving lessons.

What do these rulings mean for you?

The rulings show that you cannot simply get out of your franchise agreement. Disappointing results or less job satisfaction are not, in themselves, sufficient grounds to discontinue operations. If you want to argue that continuation is not financially feasible, you must substantiate this with concrete financial data.

So when entering into a franchise agreement, think carefully about the options for terminating the agreement early. Make clear arrangements about the termination options, the winding up of the collaboration, any damages and contractual penalties.

Have you already stopped, or has your franchisor filed a claim for damages? Then it is important to have that claim critically reviewed. The franchisor cannot simply claim all franchise fees for the remaining contract period. Costs saved, income from a replacement franchisee and any additional costs also play a role in calculating the damage. In addition, invoking a contractual penalty clause may be unacceptable in certain circumstances.

Avoid surprises when ending your franchise

Are you considering terminating your franchise agreement early, or would you like to know which risks your contract entails? Then have your franchise agreement legally reviewed. The corporate lawyers of The Legal Company are happy to support you with this. Feel free to contact us at info@thelegalcompany.nl or call 020 345 0152.

Blog by corporate lawyer Puck de Jong LL.M.

De afgelopen jaren stonden in het teken van de Wet VBAR, het wetsvoorstel dat een einde moest maken aan onduidelijkheid over de zzp’er. Het kabinet heeft delen van dat voorstel inmiddels geschrapt. Op het eerste gezicht is dat goed nieuws: minder regels, minder administratieve last. Maar in de praktijk blijven dezelfde toetsen overeind.

“De inhoud van de samenwerking is leidend, niet wat er op papier staat.”

De Belastingdienst handhaaft sinds 1 januari 2025 weer actief op schijnzelfstandigheid. En recente uitspraken van de Hoge Raad bevestigen dat rechters strikt toetsen of er sprake is van ondergeschiktheid en gezagsverhouding.

Voor uw praktijk betekent dit drie dingen. Een: leg de samenwerking duidelijk vast, met aandacht voor de inhoud. Twee: voorkom dat een zzp’er feitelijk werkt als werknemer. Drie: wees voorbereid op een controle, en weet hoe u de relatie kunt herzien als dat moet.

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