Cost price that is too high as a hidden franchise fee
An interim judgment of the District Court of The Hague dated 30 August 2017, ECLI:NL:RBDHA:2017:10597 (Happy Nurse), shows that the court considered the question whether the cost price charged by the franchisor to the franchisee was correct.
The franchise system is as follows. The personnel mediated by the franchisees enter into an employment contract with the franchisor and are paid by the franchisor. The franchisor invoices the hirers for the hours worked. After withholding a franchise fee, the franchisor also passes on the amounts received from the hirers to the franchisees.
The franchisees independently determine the rate for the staff to be borrowed. This rate includes a cost price. The cost price must be determined by the franchisees themselves on the basis of the so-called “wage cost price conversion factor”. This “wage cost conversion factor” is determined annually by the franchisor. Among other things, that component does not excel in transparency.
The franchise agreements that the franchisor concludes with the franchisees are materially similar to the franchise agreements that another franchise organization (Olympia) has concluded with its franchisees. In the judgment of the Court of Appeal of The Hague on 12 January 2016, ECLI:NL:GHDHA:2016:256 (J&P Consultants/Olympia), it was determined, among other things, that, insofar as the compensation for the cost price paid by the franchisees, in retrospect, the actual exceeds the cost price, this has been paid unduly (Article 6:203 paragraph 2 of the Dutch Civil Code) and can therefore be reclaimed by the franchisee.
The court follows this judgment and rules that a reasonable interpretation of the franchise agreement means that it is impermissible if the franchisor, by charging an excessive cost price, has created a second (hidden) franchise fee in addition to the franchise fee.
The court has not yet been able to determine whether there has actually been an excessive cost price charged and indicates that it intends to have this further assessed by experts.
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
Supermarket letter – 19
Coop liability for damages due to non-performance towards the franchisee
Damage estimate after wrongful termination of the franchise agreement by the franchisor
In a judgment of the Supreme Court of 15 September 2017, ECLI:NL:HR:2017:2372 (Franchisee/Coop), it was discussed that supermarket organization Coop had not complied with agreements, as a result of which the franchisee
Franchisor is obliged to extend the franchise agreement
On 6 September 2017, the Rotterdam District Court ruled, ECLI:NL:RBROT:2017:6975 (Misty / Bram Ladage), that the refusal to extend a franchise agreement by a franchisor
The (in)validity of a post-contractual non-competition clause in a franchise agreement: analogy with employment law?
On 5 September 2017, the District Court of Gelderland, ECLI:NL:RBGEL:2017:4565, rendered a judgment on, among other things, the question of whether Bruna, as a franchisor, could invoke the prohibition for a
Column Franchise+ – mr. J Sterk: “Court orders fast food chain to extend franchise agreement
The case is set to begin this year. For years, the franchisee has been refusing to sign the new franchise agreement that was offered with renewal, as it would lead to a deterioration of his legal position
Not a valid non-compete clause for franchisee
On 18 November 2016, the interim relief judge of the Central Netherlands District Court, ECLI:NL:RBMNE:2016:7754, rendered a judgment in the issue concerning whether the franchisee was held