A new franchisor against will and thanks
Mergers between franchise organizations are no longer an exception. Multivlaai/Limburgia, DA/DIO, Emté/Jumbo are recent examples of this. Often consultations are held in close consultation with franchisees and their associations about merging the formulas. This consolidation often leads to stronger organizations. So far so good. However, in the supermarket sector, which is characterized by a scarcity of good locations, this consolidation battle has had a special phenomenon in recent years; the legal division.
The supermarket organization that wants to sell one or more locations owned by franchisees to a competing supermarket organization, but does own the (main) rental rights thereof, establishes a new legal entity. Subsequently, only the rental agreement is included therein. Under the law, this can be done relatively simply by publishing the proposed split in a national newspaper (a tiny advertisement in the Reformatorisch Dagblad will suffice) and filing the relevant documents with the Chamber of Commerce. The tenant’s consent or even notification thereof is not formally required. If the franchisee, who as a rule does not read that newspaper or consult the commercial register on a daily basis, does not lodge an objection with the court within 30 days, the division is a fact. Not infrequently, the supermarket organization “forgets” to inform the franchisee concerned in good time due to its duty of care. As soon as the rental rights have been irreversibly transferred to the new legal entity after thirty days, the competing supermarket organization reports to the unsuspecting franchisee with a proposal for cooperation. Of course, he only feels the hot breath in the neck of a lease termination if the proposal is said no, and on the other hand, the selling supermarket organization casually announces that it is discontinuing the formula. In this way, the selling supermarket organization knows how to earn a nice pocket money from the sale of a company that is not its own. As a mirror image, the franchisee suddenly finds himself in a rather dependent bargaining position. If you wanted to draw a parallel, I would say that the franchisee is being married off. It remains to be seen whether love follows.
Is there nothing to do about this then? Yes! It starts with the awareness of this risk. In the new ROZ model, Article 16 of the General Provisions, after a lobbying of tenants, at least includes the obligation of the landlord to inform the tenant in good time about a division proposal. However, almost all supermarket organizations apply different rental conditions, whereby such information obligations are still carefully kept out. Franchisees should also be aware when entering into the partnership that they can make agreements whereby the right to split can be excluded. Such an exclusion ensures that one is sold to the competitor against will and thanks.
Property owners in particular – and these too are often (former) franchisees due to the use of hire/outlet constructions – should be alert when entering into a lease with supermarket organizations for the “quartets” of establishments by their own franchisor. This can be achieved by excluding the power to divide in the rental agreement.
Mr J. Sterk – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to strong@ludwigvandam.nl
Other messages
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The Association of Franchisees of Sandd (VFS) has today summoned Sandd and PostNL before the court in Arnhem. The VFS believes that Sandd and PostNL are letting the franchisees down hard.
Article The National Franchise Guide: “Why joint and several liability, for example, next to private?” – dated 7 January 2020 – mr. AW Dolphin
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Ludwig & Van Dam Advocaten assists Sandd franchisees: Franchisees Sandd challenge postal monopoly in court – dated 12 November 2019 – mr. AW Dolphin
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Supermarket letter – 26
Supermarket Newsletter No. 26
Link franchise agreement and rental agreement uncertain? – dated October 14, 2019 – mr K. Bastiaans
It is no exception within a franchise relationship that the parties agree that the franchise agreement and the rental agreement are inextricably linked.