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
Column Franchise+ – mr. J. Sterk – “Franchisee does body check better than franchise check”
A gym embarks on a franchise concept that offers “Body Checks” and discounts to (potential) members in collaboration with health insurers.
Seminar Mrs. J. Sterk and M. Munnik – Thursday, November 2, 2017: “Important legal developments for franchisors”
Attorneys Jeroen Sterk and Maaike Munnik of Ludwig & Van Dam Advocaten will update you on the status of and developments surrounding the Dutch Franchise Code and the Acquisition Fraude Act.
Goodwill at end of franchise agreement
In a case before the Amsterdam Court of Appeal on 26 September 2017, ECLI:NL:GHAMS:2017:3900 (Seal & Go), a franchisee claimed compensation for goodwill (ex Article 7:308 of the Dutch Civil Code) after the
Article in Entrance: “Resignation”
Fire an employee who is not performing well? The subdistrict court is strict. If you, as an employer, cannot demonstrate that you have done everything yourself to make the person function better, it will be
Cost price that is too high as a hidden franchise fee
An interlocutory judgment of the District Court of The Hague dated 30 August 2017, ECLI:NL:RBDHA:2017:10597 (Happy Nurse) shows that the court has considered the question whether the
Supermarket letter – 19
Coop liability for damages due to non-performance towards the franchisee