Clarity regarding financial obligations of franchisees
Franchisees generally have various long-term financial obligations towards the franchisor. This includes, for example, fee obligations, obligations with regard to contributions for advertising and promotion, rents in connection with possible subletting, as well as various other obligations such as (additional) financial obligations in the field of training, administration, additional marketing efforts, etc.
One of the most important principles of the European Code of Honor on Franchising is that it must be possible to deduce unambiguously from the franchise agreement how all financial obligations between franchisor and franchisee work together. This means that, for example, turnover-related sublease obligations must be integrated into the franchise agreement or must form part of the franchise agreement as an integral appendix. This may also relate to abruptly changing supplier credit, if the franchisor also has a wholesale function. Franchisees can suddenly find themselves in business difficulties as a result of such a change of course. By no means always does such an essential obligation – which does not take into account whether this last example has been agreed in advance – form part of the franchise agreement, or a very clear reference is missing, for example to general terms and conditions in which this is clearly and must be made transparent by the franchisor. After all, he is under the obligation, in accordance with the European Code of Honor on Franchising, to make essential financial obligations known in advance and, moreover, to record these in the franchise agreement.
Franchisees are therefore advised to assess all relevant documents (franchise agreement, sublease agreement, general terms and conditions, etc.) in advance when concluding the franchise agreement in order to prevent misunderstandings along the way. A good franchisor will of course proceed on its own initiative to explicitly indicate to the franchisees all essential financial obligations in advance. After all, he takes the European Code of Honor on Franchising as his starting point. If the franchisor is a member of the Dutch Franchise Association (NFV), he is also bound to do so at all times in accordance with the articles of association of the NFV.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Ludwig & Van Dam attorneys summon Sandd and PostNL on behalf of the Sandd franchisees – dated 9 January 2020 – mr. AW Dolphin
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
Franchisees are often asked to co-sign the franchise agreement in addition to their franchise, for example. Sometimes franchisees refuse to do so and the franchise agreement is not signed.
Ludwig & Van Dam Advocaten assists Sandd franchisees: Franchisees Sandd challenge postal monopoly in court – dated 12 November 2019 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) is challenging the decision of State Secretary Mona Keijzer to approve the postal merger between PostNL and Sandd before the court in Rotterdam.
Franchisee trapped by non-compete clause? – dated October 21, 2019 – mr. AW Dolphin
The District Court of East Brabant has ruled that a franchisee was still bound by the non-competition clause in the event of premature termination of the franchise agreement.
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.