Continuation of operation, despite substantial backlog of franchise fee?
Can the franchisee continue to operate despite a significant franchise fee payment arrears? On 29 April 2014, the District Court of Rotterdam (ECLI:NL:RBROT:2014:4701) ruled on this question in preliminary relief proceedings.
As a franchisor, IPIC rents out an IMO car wash to a franchisee for operation. The franchisee has left more than a ton of franchise fee due unpaid. After notice of default, IPIC dissolves the franchise agreement extrajudicially, replaces the locks to the car wash and renders the car wash unusable for the franchisee.
The franchisee claims in preliminary relief proceedings to have the car wash freely available again. As a counterclaim, the franchisor claims – inter alia – insofar as required, to oblige the franchisee to vacate the leased property and to keep it vacated.
The preliminary relief judge rules that, now that the franchise agreement can (partly) be qualified as the lease of business space, the franchisor cannot dissolve the lease agreement extrajudicially. Only the court can dissolve a commercial space lease (Article 7:231 paragraph 1 DCC). The court awards the claim to make the car wash available again to the franchisee. In that context, the franchisor’s counterclaim for eviction of the leased property is also rejected.
The legal qualification of a franchise agreement sometimes remains difficult if there is also the use of immovable property. If the use of the immovable property can be qualified as a business space and there is some form of compensation for this, then the legal protection rules for the benefit of the tenant of a business space will very quickly prevail. An important protective rule is that the tenant cannot prematurely terminate the lease for a business space without the court or without the cooperation of the tenant. A preliminary legal analysis of the franchise agreement and the relevant circumstances can help to prevent uncertainties.
Mr AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys,franchise legal advice. Do you want to respond? Mail to dolphijn@ludwigvandam.nl
Other messages
Franchisee circumvents non-competition clause through partner – mr. RCWL Albers – dated February 24, 2022
In a recent case, a graphics services franchisor attempted to ...
Article De Nationale Franchise Gids: “Changing the franchise formula is possible” – mr. T. Meijer – dated February 8, 2022
Many franchise formulas are constantly evolving. The adage 'to stand ...
Corona justifies halving the franchise fee – mr. RCWL Albers – dated February 1, 2022
In a recent ruling by the Amsterdam Court of Appeal, ...
Can a franchisor increase the interim franchise fee and change the formula? – mr. AW Dolphijn – dated January 21, 2022
A franchisor must be able to adjust the franchise formula ...
Franchise agreement with free PLUS entrepreneur canceled – mr. AW Dolphijn – dated January 19, 2022
It is not often that a supermarket organization terminates an ...
Article De Nationale Franchise Gids: “Franchisee exclusively bound by a non-compete clause as a private company” – mr. M. Munnik – dated January 11, 2022
On December 22, 2021, the Rotterdam District Court issued an ...