By means of a non-disclosure agreement (NDA), franchisor and (prospective) franchisee lay down agreements on the exchange and/or provision of confidential information.
In a NDA it is agreed for what purpose confidential information is provided by the franchisor, which information is considered confidential and what the (prospective) franchisee may and may not do with that information. In many cases, a NDA further regulates: how information provided can be recognised as confidential information; or this includes information provided orally; from whom the information should originate (e.g. from which persons within the franchisor’s organisation); the NDA’s coverage of employees or auxiliaries; that the NDA doesn’t obligate entering into further commitments and the ownership of the information provided.
Many franchisors are familiar with the adage ‘a good conversation begins with a NDA’ and dare to sign or request a NDA. The pitfalls in drawing up a NDA are less well known. As stated above, the purpose of exchanging and/or providing confidential information is included in the NDA. However, if this purpose is described too precisely, confidential information can already be divulged. A NDA should therefore contain the correct wording and a consequence if the confidentiality is violated (often a fine). The purpose of this is to deter parties who are only interested in discovering confidential or sensitive information free of charge.