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. The Franchise Act does impose some restrictions on this prohibition, but such a prohibition is still possible. Sometimes attempts are made to circumvent the prohibition of competition. For example, see that commented-out statement here: https://bit.ly/3piUbyK
In a remarkable case, the preliminary relief judge ruled on October 22, 2020 (ECLI:NL:RBGEL:2020:5763) that a former franchisee had not violated the non-competition clause, even though the former franchisee leased the store to a friend who continued similar activities there.
The franchise agreement provided, among other things, the following:
In view of the protection of (the…) Formula, for a period of two years after termination of this Agreement, the Franchise will not, directly or indirectly, be self-employed or employed or in the form of any company or legal form, work or are otherwise involved, in any form whatsoever, in activities similar to (the…) Formula or the activities performed by the Franchisor under this Agreement.
The preliminary relief judge ruled that the former franchisee was actually not (any longer) able to close the shop and had no control over the new company. There was therefore no violation of the prohibition of competition, according to the court. There was therefore no question of evading the prohibition of competition. One may wonder whether involvement in the competitive activities, as referred to in the post-non-compete clause, does not exist if there is (sub)leasing to a third party that continues competing activities at the same location. Again and again, a concrete situation will have to be assessed on its specific merits in order to determine whether there has been a violation of the prohibition of competition.
mr. AW Dolphijn – franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl
![240verbod](https://www.ludwigvandam.nl/wp-content/uploads/2020/12/240verbod.jpg)
Other messages
Franchisors may no longer impose changes to store hours – February 12, 2019 – mr. AW Dolphin
At the end of 2018, a draft of the “Freedom of Choice for Retailers (Opening Hours) Act” was presented.
When does a franchisor go too far when recruiting franchisees?
The judgment of the Court of Appeal of Arnhem-Leeuwarden on 5 February 2019 dealt with whether the franchisor had acted impermissibly when recruiting the franchisees.
Advisory Board on Regulatory Pressure (ATR) advises State Secretary Keijzer about the Franchise Act
In short, it is first advised to actively inform franchisors and franchisees about this amendment to the law.
Post non-competition ban on services and sales franchise
When a franchise agreement ends, many franchisees encounter a prohibition in the franchise agreement to perform similar work for a period of time thereafter
The concept of the Franchise Act: impact for franchisors and franchisees – dated February 5, 2019 – mr. AW Dolphin
Ludwig & Van Dam Advocaten believes that if the draft of the Franchise Act actually becomes law, a lot will change for franchisors and franchisees.
Buy franchise business and the laid off sick employee from 7 years ago
The question is whether a Bruna franchisee, when selling the franchise company to Bruna, should have stated that seven years ago an employee had left employment sick.