Agreed early termination of the franchise agreement
A franchise agreement is usually concluded for a specific period of time. Early termination is possible if both the franchisor and the franchisee reach an agreement. In the matter that the District Court of Rotterdam assessed on 26 July 2023, ECLI:NL:RBROT:2023:7014, the question was whether there was an agreement to terminate the franchise agreement prematurely.
A franchisee prematurely stopped the execution of the franchise agreement because he believed that an agreement had been reached with the franchisor.
According to the franchisor, it was admittedly investigated with the franchisee whether agreement could be reached on the conditions under which the franchise agreement could be terminated prematurely. The parties had also drawn up a settlement agreement for this purpose. However, according to the franchisor, the parties could not agree on the conditions. There was therefore never a signed settlement agreement. The franchisor therefore claimed compensation for damage in respect of the period in which the franchise agreement should have been fulfilled.
However, the court is of the opinion that a signed settlement agreement is not necessary to reach early termination. According to the court, an e-mail from the franchisor to the franchisee shows that the franchisor had agreed to the early termination. The e-mail states: “As agreed yesterday afternoon, we will jointly ensure that we end the collaboration as of October 1.”. The court sees no reason to assume that the termination was dependent on further conditions to be set by the franchisor regarding the precise settlement. The franchisor’s claim for damages was therefore rejected by the court.
When negotiating the premature termination of the franchise agreement, the parties would do well to first record in writing when an agreement has been reached. This is possible, for example, by first agreeing that there is only an agreement if both parties have signed.
Ludwig & Van Dam lawyers, franchise legal advice.
Do you want to respond? Then email to dolphijn@ludwigvandam.nl
Other messages
Article Franchise+ – “Recipient’s liability in a franchise context, what exactly is that about?” – mr. K. Bastiaans – dated November 24, 2020
The phenomenon of hirer's liability means that a third party can be held liable for the debts of another under certain conditions.
Franchisor liable for errors made by a franchisee? – mr. AW Dolphijn – dated November 23, 2020
A franchise organization asked the court to declare that the franchisor is not liable if a franchisee has made a serious mistake with a customer.
The Real Intentions of the Parties to a Franchise Agreement – Mr. C. Damen – dated November 23, 2020
What really was the idea of the parties when they concluded a franchise agreement?
Circumventing the prohibition of competition in the franchise agreement – mr. AW Dolphijn – dated November 10, 2020
A non-competition clause in a franchise agreement is often experienced as objectionable by franchisees, especially if the non-competition clause also applies after the franchise agreement has expired.
Article Franchise+ – “How do I get rid of my debts: Also for franchisees and franchisors” – mr. AW Dolphijn – dated October 20, 2020
A reorganization may also be necessary for franchisees and franchisors who are in financial difficulties in order to continue to exist.
Article De Nationale Franchise Gids: “Reinvestment obligation for franchisees has limits” – dated October 13, 2020 – mr. RCWL Albers
In practice, it often happens that franchisors choose to renew their franchise formula and the appropriate image