Agreements Related to the Franchise Agreement

On 31 October 2017, the Arnhem-Leeuwarden Court of Appeal issued similar judgments for nineteen franchisees (ECLI:NL:GHARL:2017:9453 through ECLI:NL:GHARL:2017:9472). The ruling in the first instance of the District Court of Gelderland of 22 January 2014, ECLI:NL:RBGEL:2014:377, had already been published in one of these cases. 

In addition to a franchise agreement with the franchisor, the franchisees had also concluded a hire-purchase agreement with another party for a device (a cardio scan) that could be used in the implementation of the franchise formula. It is common ground that the franchise agreements had ended. With this, the franchisees also wanted to get rid of the hire-purchase agreement they had concluded with a finance company. The finance company refused this and demanded (continued) payment from the franchisees of the rent/purchase price. 

The question at hand was whether the franchise agreements are so closely factually and economically related to the hire-purchase agreements with another party that there is actually one agreement, which is laid down in separate documents. If there is one agreement (i.e. with three parties), then the fate of the franchise agreement (no obligation to pay a fee) would also apply to the hire purchase agreement (no obligation to pay a hire purchase price).

The franchise agreement expressly stipulated that the franchisee was required to have a certain type of cardio scan for the execution of the franchise agreement. The franchisee would decide for himself how the necessary equipment could be made available. However, the possibility of entering into a lease agreement with regard to the cardio scan is taken into account. It was agreed that upon termination of the franchise agreement, the lease agreement for the cardio scan would continue as usual. 

Although this shows that it was agreed that there would be no related agreements, it is possible that the actual situation is different. In the first instance, the court ruled that it had been sufficiently established that the franchisor made every effort to induce the (prospective) franchisees to acquire the prescribed cardio scan by entering into a lease-purchase agreement with a finance company. According to the court, these efforts by the franchisor meant that there were sufficiently coherent agreements and that the franchisees were no longer obliged to pay the rent/purchase fee, because the franchise agreement had ended. 

The Court of Appeal ruled otherwise, namely that the franchisees had not sufficiently demonstrated that they could believe that they could have trusted that if they terminated the franchise agreement, the obligations under the hire-purchase agreements would also lapse. The court seems to attach value to the written provisions in the franchise agreement. 

The Court of Appeal also considered that the franchisees should not otherwise have trusted that the financing company was involved in the franchise formula. For example, according to the Court of Appeal, the financing company did not have to delve into the background of those applications and the way in which those applications came about when the separate lease agreements were concluded, and it did not do so. 

This judgment once again showed the importance of the text of the franchise agreement and the need for (prospective) franchisees to be properly informed about the content, meaning and consequences of entering into a franchise agreement. 

mr. AW Dolphijn – Franchise lawyer 

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .