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
Other messages
Franchisor prohibits opening (franchise) company
A franchisor applied for interim measures to prohibit a franchisee from opening a franchisee's business.
Column Snack courier no. 8: “With 7 steps you comply with the privacy law”
Much has already been written about the General Data Protection Regulation (GDPR). The law has been applicable since 25 May, but many companies have not yet had their privacy policy in order.
Forced to switch to a different franchise formula at the existing location?
If a franchise formula ceases to exist, for example if it is incorporated into another organization, the question may be whether the franchisee is also obliged to be incorporated into
Column Franchise+ – 50 percent more franchise lawsuits
The 2018 Legal Franchise Statistics published by Ludwig & Van Dam Advocaten shows that there has been a 50% increase in the number of judgments in court cases rendered in 2017 compared to
A closer look at the intention to introduce franchising legislation
On May 23rd, State Secretary Mona Keijzer informed the House of Representatives about the imminent franchise legislation. The National Franchise Guide previously published this article.
Consumer Protection Applies to Franchisee
The consumer enjoys broad protection on the basis of the Civil Code.